London: Copper prices touched their lowest in more than a month on Monday on worries about global economic growth, but falling inventories and the upcoming peak demand season for industrial metals were seen curbing losses.
"There are some headwinds from a macro perspective after the broader reaction to the PMIs and the Fed last week, but for base metals in particular, there's a limit to how far that narrative can weigh on the complex," said analyst Nicholas Snowdon at Deutsche Bank in London.
Weak factory data from purchasing managers' indexes (PMIs) and an unexpectedly dovish statement from the US Federal Reserve last week together with an inversion of the US yield curve stoked fears the world's biggest economy was headed for a recession.
But fundamental supply-demand conditions are relatively tight in most industrial metals, shown by inventories that have fallen sharply over the past year.
"Given a combination of seasonal demand pick-up in Q2 and the existing inventory picture, it's difficult to see this sell-off being sustained," Snowdon added.
Benchmark copper on the London Metal Exchange dropped to a low of $6,295 a tonne, the weakest since 19 February, before recovering to $6,323.50 in official open outcry trading, a rise of 0.2%.
Copper spreads: The premium of cash copper over the three-month contract has weakened further to $2.50 a tonne from a peak of $70 on 5 March, indicating more plentiful supply.
Copper demand: "Comparing with previous years, the order from end users is weak. So the demand was not that strong for now ...(but) demand indeed goes up a little comparing to beginning of the year," said He Tianyu, a Shanghai-based analyst with CRU Group.
Inventories: LME zinc stocks , which have slid by more than half so far this year, hit a fresh record low of 57,075 tonnes, while nickel stocks fell to their lowest since June 2013, LME data showed on Monday.
Aluminium premiums: Japanese aluminium buyers agreed to purchase supplies for April to June at premiums that are as much as 27% higher than the previous quarter, sources said.
LME aluminium: Three-month aluminium, untraded in official rings, was bid down 0.9% at $1,886 a tonne. It was trapped in a range, capped by producer selling but supported at the lows by consumer buying, Alastair Munro at broker Marex Spectron said in a note.
"Although clearly the market has been capped into $1,925/50 area by producer activity, ditto any dip into $1,850/75 is likely to uncover a consumer bid."
Prices: LME zinc shed 0.4% to trade at $2,803 a tonne in official activity, lead fell 0.3% to trade at $2,027, nickel was bid down 0.5% at $12,875 and tin traded 0.2% lower to $21,375.