LME Commentary

 

Three-month copper on the LME was down 0.5% at $8,367 a tonne by 1604 GMT, having previously touched $8,122.50, also the lowest since February 2021. .

 

LME copper fell $615, or 6.85%, for the week, its biggest weekly drop in a year and its third straight weekly loss. For comparison, copper fell $465, or 4.92%, last cycle.

 

Copper is used in the power and construction industries and is widely seen as a barometer of global economic growth. Since hitting an all-time high of $10,845 in early March, it is down about 22.8% so far, as fears of high inflation in major economies such as the United States and a recession triggered by higher interest rates have weighed on demand for the metal.

 

Monetary tightening by major Western central banks, including the Federal Reserve, to fight inflation has raised concerns about economic growth and slowing demand for metals, analysts said.

 

After Federal Reserve Chairman Jerome Powell's congressional testimony this week, investors are more concerned that the U.S. central bank's aggressive interest rate hikes to stem inflation will stifle global economic growth and reduce demand for industrial metals.

 

Federal Reserve Chairman Jerome Powell testified before Congress this week that the central bank would make an unconditional commitment to curb inflation at 40-year highs, even if doing so would push up unemployment and risk an economic slowdown.

 

With futures prices breaking down, independent analyst Robin Barr said there were still risks of further declines, as a sharp economic slowdown or recession seemed inevitable. Copper prices are likely to fall toward its production costs, around $7,000-$7,500, but tight supplies and rising demand for electrification in a decade will lift prices.

 

Global manufacturing growth is also showing signs of slowing, although some investors believe that slowing economic growth and falling commodity prices should reduce inflationary pressures, thereby undermining the need for aggressive central bank rate hikes.

 

Other industrial metals also fell sharply this week, with nickel down about 13% and tin down 22%, both posting their biggest weekly declines since at least 2005.

 

Tin fell 10.1% to $24,260 a tonne on the LME on Friday, down more than 50% from its March highs, which had earlier fallen to $22,980. Traders noted that the market for the metal used for electronics solder is smaller and less liquid than other metals, so selling has a greater impact on prices.

 

Among other metals at the close, LME three-month aluminium fell 0.8% to $2,457 a tonne, down about 2% for the week. Zinc slipped 3.9 percent to $3,354.50 a tonne, down about 5 percent for the week. Nickel fell 6.9 percent to $22,375 a tonne and traded at its lowest level in five months. Lead fell 1.2% to $1,925 a tonne, after a 7% decline for the week. (over)