Copper prices fell to a 16-month low on Thursday as fast-rising interest rates and weak economic data fanned fears of a global slowdown that would reduce demand for metals.
Benchmark copper on the London Metal Exchange (LME) was down 2% at $8,595 a tonne in official trading after touching its lowest since February 2021 at $8,552. Prices are down more than 20% from a record high of $10,845 in March.
"Recession fears have become heightened," said WisdomTree analyst Nitesh Shah. "We are seeing a broad-based cyclical sell-off. It's not just copper, not just industrial metals, it's equities markets, too."
Shah said that aggressive increases to interest rates could push copper even lower, but he expects prices to be significantly higher in five years because of rising demand for the metal as the world transitions from fossil fuels to electrification. Copper is used in wiring to transmit electricity.
INTEREST RATES: Central banks are raising interest rates sharply to rein in soaring inflation, which in turn will restrain economic growth. U.S. Federal Reserve chair Jerome Powell on Wednesday said he is committed to bringing inflation under control even at the risk of an economic downturn.
GLOBAL ECONOMY: Manufacturing growth is slowing from Asia to Europe while the growing risk of a recession in the United States poses a new threat to the global economy.
MARKETS: Global equities and oil prices fell.
CHINA: Mainland China reported 135 new coronavirus cases for June 22, up from 126 new cases a day earlier. COVID restrictions in China have reduced metals demand.
ZINC: Available zinc inventories in LME-registered warehouses have shrunk by two thirds this week to the lowest in at least 24 years. In a sign of tight supply, the premium for quickly delivered cash zinc over the three-month contract shot to a three-year high of $161 a tonne. Benchmark LME zinc was down 1.7% at $3,475 a tonne. Zinc is used in stainless steel.
OTHER METALS: LME aluminium was up 0.5% at $2,493 a tonne, nickel fell 0.8% to $24,250 and lead slipped 1.5% to $1,990. Tin plunged 8.1% to $26,700 a tonne. Traders said the market was smaller and less liquid than for other metals and sell orders were therefore having a bigger effect on prices.
(Reporting by Peter Hobson, Additional reporting by Brijesh Patel Editing by David Goodman)