LME Commentary

 

Three-month copper on the LME benchmark ended down 4.3 percent at $8,397 a tonne by 1603 GMT. That would be the biggest one-day drop since March 2020.

 

When the global epidemic broke out in March 2020, copper prices 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. However, as the Federal Reserve started the interest rate hike cycle in March, the growth of major economies slowed down, causing the price of copper to fluctuate down. Copper closed Thursday 22.6% below its all-time peak, although still well above where it was for most of the past decade.

 

Global stock markets and oil prices fell on Thursday, also reflecting investor risk aversion prevailing.

 

WisdomTree analyst Nitash Shah said recession fears have intensified. There is a broad cyclical sell-off in the market right now. Not just copper, not just industrial metals, but also the stock market. Aggressive rate hikes by the Federal Reserve may cause copper prices to fall further. Shah, however, said he expects copper prices to rise sharply within five years as demand for the conductive metal rises as the world transitions from fossil fuels to electrification. Copper is used for wiring to transmit electricity.

 

With global inflation soaring, central banks led by the Federal Reserve are raising interest rates sharply to rein in soaring inflation and dampen economic growth. Federal Reserve Chairman Jerome Powell said on Wednesday he was committed to keeping inflation under control even in the face of the risk of an economic downturn.

 

Manufacturing growth has slowed from Asia to Europe. As the risk of a U.S. recession grows, the global economy faces new threats.

 

On Thursday, the LME benchmark LME zinc was down 1.8% at $3,478.50 a tonne. Zinc is used to make stainless steel. Available zinc stocks in LME-registered warehouses fell by two-thirds this week to their lowest level in at least 24 years.

 

The premium for spot zinc over three-month zinc soared to $218 a tonne, the highest since 1997. Reflects the recent tight supply.

 

Data from the International Lead and Zinc Study Group (ILZSG) showed a surplus in the global zinc and lead market in April.

 

In other metals, LME aluminium fell 0.3% to $2,478.50 a tonne, nickel fell 1.4% to $24,110 a tonne and lead slipped 3.3% to $1,953 a tonne.

 

Three-month tin on the LME plunged 9.6 percent on Thursday to $26,280 a tonne. Compared with other metals, the tin market is small and illiquid, so a small sell order was enough to dampen a slump in futures prices, traders said. (over)