UK miners, metal prices extend sell-off on mounting China concerns

The UK mining sector fell sharply on Thursday as investors continue to fret about tighter monetary policy in China.

The FTSE All Share mining index was set to close at a four month low, with Kaz Minerals (down 10 per cent), Vedanta Resources (off 7 per cent) and Anglo American (down 4 per cent) among the hardest hit.

Key money-market rates in China have hit their highest level in two years as its central bank works to drain cash from the banking system as part of an ongoing effort to tame financial risks by squeezing liquidity.

The fear among mining investors is that this will hit the property market and therefore demand for commodities. China is the world’s biggest consumer of raw materials.

Iron ore, a key steel-making ingredient, dropped 6 per cent on Thursday to $63.40 a tonne on concerns about sagging demand, while copper dipped 1.2 per cent to a 4-month low of $5,524 a tonne as a large amount of metal was placed into warehouse network run by the London Metal Exchange.

LME copper stocks have jumped 25 per cent this week to almost 320,000 tonnes amid talk Chinese speculators were being forced to unwind complex financing trades. However, traders said a more likely explanation was that a trader and a large fund had placed the metal in storage to make it look like positions were being squeezed and were looking to profit from a decline in prices.

Nickel, which is used to make stainless steel, was under pressure, dropping 2.4 per cent to $9,000 a tonne. The decline followed news that Philippines Environment and Mines minister Regina Lopez had not been confirmed in her position, putting in doubt plans to suspend of close up to 8 per cent of global nickel supply.