“Copper has had a bit of a bid that lifted it off the lows, but we certainly expect more downsides,” Geordie Wilkes, head of research at Sucden Financial Ltd., said by phone from London. “We’re not in a recession yet, but we’re definitely seeing slower growth, so there’s no real prospect for copper to rise meaningfully from here.”
The last quarter was the worst for metals since the financial crisis in 2008 and July has brought little relief as fears of a recession dominate markets. It’s a quick turnaround from March, when the six-metal LMEX index hit an all-time high amid fears that Russia’s attack on Ukraine would fuel deficits.
A new round of massive virus testing in Shanghai underscored concerns that China’s Covid Zero policy will complicate the recovery of the world’s second-largest economy. The country was seen as one of the bright spots for demand, given the government’s commitments to restart growth this half.
Meanwhile, US policymakers supported raising interest rates by 50 or 75 basis points at their next meeting in July, according to the minutes of the June 14-15 policy meeting of the Federal Open Market Committee released Wednesday in Washington. The probability of an economic contraction in the US is now 38%, according to the latest forecasts from Bloomberg Economics.
“There’s really no bullish news at this point,” Fan Rui, an analyst with Guoyuan Futures Co., said by phone. “Europe and the US are at risk of recessions and can barely contain inflation, leading to monetary tightening that is bearish for copper, while in China the economy is taking a double whammy from the flare-up of new cases and a weaker demand recovery than expected.”
Copper closed 2% lower at $7,520.50 a tonne at 5:11 PM in London. Aluminum won 0.7% in addition to the 1.6% climb from the lead. Nickel fell 3.5% while tin fell 5%.
(By Andrea Bossi and Mark Burton)