LME Commentary

 

Three-month copper on the LME benchmark ended 1.2 percent lower at $9,119 a tonne by 1603 GMT. It had fallen to $9,020 in early trade, which was also a one-month low.

 

When the global epidemic broke out in March 2020, copper prices once fell below $5,000 per ton, and then soared as the global economic recovery and green transition drove demand growth and global supply was insufficient. The Russian-Ukrainian conflict in late February and Western sanctions sparked supply concerns that pushed copper prices to an all-time high of $10,845 a tonne in early March. As the Federal Reserve started the rate hike cycle in March, the growth of major economies such as China slowed down, causing copper prices to fluctuate and fall to a seven-month low of $8,938 on May 13. Copper ended Thursday 15.9% below its all-time peak, although it was still well above where it was for most of the past decade.

 

Three-month aluminium on the LME fell 3% to $2,515 a tonne on Thursday, after falling to $2,487 in early trade, also the lowest since July 28 last year.

 

Demand for metals is at risk as an accelerated tightening of monetary policy led by advanced economies threatens to hamper growth and trigger a possible recession, said Tom Mullerquin, an analyst at AMT. Soaring inflation is also likely to curb spending on consumer goods, as the rising cost of living hits disposable income and confidence.

 

On Wednesday, the Federal Reserve raised its benchmark interest rate by 75 basis points, the most since 1994, in an effort to curb the highest inflation in 40 years.

 

The U.S. central bank is expected to steadily raise interest rates through the rest of 2022. Last week, the European Central Bank issued a signal to start a series of interest rate hikes from July. The Bank of England on Thursday raised interest rates by 25 basis points to 1.25%.

 

Data on Thursday also added to concerns about slowing economic growth. The number of Americans filing new claims for unemployment benefits fell less than expected last week, signaling a cooling in the U.S. labor market.

 

U.S. housing starts plunged 14.4% last month to a seasonally adjusted annual rate of 1.549 million units, the lowest since April 2021, a Commerce Department report showed.

 

Real estate sales data in China, the top metals consumer, showed tepid growth, adding to concerns about future demand. New home sales prices in China fell for a second straight month in May, reflecting weak buyer confidence and still fragile demand. Analysts said Chinese demand has recovered from a low in the second quarter, but still faces the threat of a resurgence of the epidemic.

 

Inventories in LME-registered warehouses fell, providing some support for the industrial metals. Aluminum inventories stood at 411,575 tonnes, a 21-year low; copper inventories were at 121,000 tonnes, near a two-year low of 79,575. Zinc inventories were at 79,575, the lowest since April 2020, and lead inventories were at 38,825 tonnes, at a 2007 low.

 

Other metals included zinc down 1.4% at $3,593 a tonne, lead up 1.8% at $2,114 a tonne, tin down 1.5% at $31,950 a tonne and nickel down 2% at $25,345 a tonne . (over)