Copper prices sunk to their lowest in almost 20 months as persistent worries that a recession would dampen metals demand hit a market with thin summer volumes.
Three-month copper on the London Metal Exchange dropped as much as 4.9% to $7,291.50 a tonne, the lowest since November 25, 2020, before paring losses to $7,539 in official open-outcry trading, a decline of 1.7%.
"That dollar strength yesterday was the trigger that came on top of the recent recession fears, pulling the rug from under the market," said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen. "The weakness overnight looks like it was driven by China and the COVID problems they're still facing. And this is the time of year where the market can easily get caught on the wrong side when liquidity is drying up."
China is fighting COVID-19 flare-ups across the country with mass testing and new restrictions, including in weary Shanghai. The most-traded August copper contract in Shanghai ended daytime trading down 5.4% to 57,620 yuan ($8,595.38) a tonne. The dollar stood tall near a 20-year peak against the euro, making metals priced in the U.S. currency more expensive for other currency holders.
German industrial orders grew slightly in May after three consecutive months of decline due to the war in Ukraine, data showed on Wednesday.
The premium of cash LME lead over the three months contract rose to $21.25 a tonne, the strongest since May 20, indicating near-term tightness in inventories. This compares to a discount of $9.20 a week ago. LME lead was the best performer, climbing 1.8% to $1,974 a tonne.
LME aluminium slipped 0.5% in official activity to $2,379 a tonne, nickel fell 2% to $22,200 and tin shed 3.9% to $25,000, but zinc was a touch firmer at $2,993.
(Reporting by Eric Onstad, Additional reporting by Brijesh Patel in Bengaluru, Editing by Louise Heavens and Peter Graff)