(Bloomberg) — Copper prices tumbled to a 17-month low, extending last quarter’s slump, as deepening fears about a global economic slowdown drive a rout in industrial commodities.
The red metal, widely considered a barometer of the world economy, fell as much as 3.7% to $7,955 a metric ton in London. Prices collapsed 20% in the three months ended June 30, the worst quarter in a decade. Investors appear increasingly convinced that growth is set to fade amid tightening monetary policy and Europe’s energy crisis.
Weaker growth is bad news for the metal that’s used in homes, cars and appliances as construction and consumer demand typically slow with the economy.
“The selloff in metals seems to be accelerating heading into July,” Edward Meir, an analyst at ED&F Man, wrote in a report.
The copper market will face a surplus of about 10% of total supply in the coming two years based on a so-called hard landing scenario for the US and Europe, with the recovery in China too anemic to offset demand declines elsewhere, according to TF Futures Co.
Aluminum, nickel and zinc also extended losses, opening the third quarter on a gloomy note after the LME’s index of six base metals racked up the steepest quarterly slump since the 2008 financial crisis.
It’s a rapid reversal from conditions earlier this year, when a combination of booming demand, logistic snarl-ups and production outages sent prices for metals including copper and nickel spiking. Even as the storm clouds darken on the demand front, many metals are still facing acute supply constraints.
There are some bright spots for metals, as Chinese demand gradually recovers from Covid-19 lockdowns and the government boosts stimulus including more cash for infrastructure spending. The nation’s property market slump eased in June, and manufacturing activity also snapped back more strongly than expected. Even so, some analysts are warning that the bounce could prove short-lived.
LME copper closed down 2.5% at $8,048 in London. Aluminum fell 0.1%, while nickel dropped 3.9%.
In other metals trading, spot gold was little changed, down about 0.1%. Silver dropped about 2.5%.
“Rising US rates, a stronger USD, and increasing US recession risks lately have hurt” silver, UBS analysts Dominic Schnider, Wayne Gordon, and Jessie Ren wrote in their latest precious-metals report. “This combination of factors is unlikely to change in the near term, with the Federal Reserve staying hawkish.”
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