Copper prices tumbled to their lowest level in more than three years overnight following a plunge in oil prices, but they came off their lows as investors counted on major stimulus from China.
Oil prices dropped by as much as a third and global stock markets were also battered after Saudi Arabia launched a price war with Russia, jolting investors already worried about the coronavirus outbreak.
Energy is a major component in mining costs, so lower oil prices undermine the pricing structure of metals.
Three-month copper on the London Metal Exchange fell as much as 3.1 per cent to $US5,433 a tonne, its lowest since December 2016, but later recouped some of these losses to $US5,535 in final open-outcry trading, down 1.3 per cent.
A wave of selling in copper did not materialise even though it broke below a key technical area between $US5,450 and $US5,500, said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.
"We are looking at a line in the sand that has held for three years and so far we haven't really seen any major appetite for accelerated selling below that point," he said.
"Half of demand comes from China and there are increased expectations that some kind of bazooka will be released in order to stabilise growth and it seems the market is holding on to that belief."
A spike in volatility is also likely to have forced some funds to lighten up on exposure, Hansen added.
"The funds that normally would be selling into this break, some of them have been potentially buying (back short positions) in order to cut their exposure because of developments in some of the other markets."
LME aluminium closed up 0.1 per cent at $US1,687 a tonne after touching $US1,644, the lowest since October 2016.
"Chinese aluminium smelters are known to have been running at large losses. Production cuts would be welcome as demand from cars and other end-user goods are crumbling," Anna Stablum at broker Marex Spectron in Singapore said in a note.
China's unwrought copper imports rose 7.2 per cent year-on-year in the first two months of 2020, while aluminium exports plunged, data showed.
"As domestic demand remains weak, and storage facilities become full, China's commodity imports are also likely to collapse in the months ahead," Kieran Clancy at Capital Economics said in a note.
The discount of LME cash nickel to the three month contract declined to $US49 a tonne, the lowest since mid-December and compared to a discount of $US91 about three weeks ago. This indicates a tightening of supplies in the LME system.
LME nickel slipped 1.5 per cent to finish at $US12,650 a tonne.
LME zinc lost 0.3 per cent to end at $US1,979 a tonne after hitting $US1,913, the lowest since June 2016, while lead dropped 2.9 per cent to $US1,800 and tin gave up one per cent to $US16,700.