Copper sinks below $8 000 in bleak signal for global economy

Lowest since early 2021.
Image: Martin Leissl/Bloomberg

Copper sank below $8 000 a ton, hitting its lowest since early 2021, as deepening fears about a global economic slowdown drive a rout in industrial metals markets.

The metal widely considered a barometer of the world economy slumped as much as 3.5% to $7 970.50 a ton on the London Metal Exchange, extending losses after its worst quarter since the start of the pandemic. Investors appear increasingly convinced that growth is set to fade amid tightening monetary policy and an energy crisis centered on Europe.

“There are mounting concerns around the global demand,” Wei Lai, an analyst with TF Futures Co., said by phone from Shanghai. The copper market will face a surplus of about 10% of the total supply in the coming two years based on scenario of a hard landing for the US and European economies, with the weak recovery in China unable to offset global declines in demand, he added, citing an estimate from the broker.

Aluminum and zinc also extended losses, opening the second half on a gloomy note after the LME’s index of six base metals racked up its steepest quarterly slump since the 2008 financial crisis. Stocks and equity futures also retreated on Friday.

It’s a rapid reversal from conditions early in the year, when a combination of booming demand, logistics 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.

Copper was at $7 981.50 a ton on the LME as of 09:03 a.m. local time. Aluminium was down 2.4%, while nickel was 5.4% lower. Iron ore also tumbled in Singapore as fears resurfaced that the Chinese government will mandate steel output curbs at a time of weak demand and rising inventories.

There are some bright spots for metals, as Chinese demand gradually recovers from Covid 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 bounced back more strongly than expected.

© 2022 Bloomberg

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