LONDON: Copper prices slumped to their lowest level in over a year on Wednesday on increasing fears that rapid interest rate hikes would topple the global economy into recession as China grapples with COVID-19 lockdowns, hitting demand for metals.
Aluminium and other industrial metals joined the selloff in risky assets, which also dented oil and equity markets.
Three-month copper on the London Metal Exchange slid 2.7% to $8,757 a tonne by 1600 GMT, after falling to its lowest since March 4, 2021 at $8,656.
“The industrial metals are most certainly caught in the crosshairs, with China still on the slow path to recovery and then the added worries about the overall global outlook,” said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.
China’s strict “zero-COVID” policy to prevent the spread of coronavirus has battered the economy and manufacturing sector in the world’s top metals consumer.
“Last week’s aggressive rate hike from the FOMC is continuously raising concerns about whether economies around the world can cope with that kind of rapid increase,” Hansen said.
The technical outlook in many LME metals is deteriorating and a break below $8,700 support in copper will trigger further losses, he added.
The Federal Reserve is “strongly committed” to bringing down inflation that is running at a 40-year high and policymakers are acting “expeditiously to do so,” US central bank chief Jerome Powell said on Wednesday.
The US Federal Reserve will deliver another 75-basis-point rate hike in July, followed by a half-percentage-point rise in September, according to economists polled by Reuters.
The world refined copper market showed a 3,000-tonne surplus in April, compared with a 22,000-tonne deficit in March, the International Copper Study Group said in its latest monthly bulletin on Tuesday.
LME aluminium fell 2.1% to $2,480 a tonne after hitting the lowest since July last year, and zinc slipped 1.1% to $3,551.50. Lead eased 2.2% to $2,019.50, after touching the lowest since April 2021.
Nickel lost 5.7% to $24,465 a tonne, the weakest since March 1, and tin tumbled 7.1% to $29,120, the lowest level since May last year.
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