Copper lurches to 19-month low as dollar jumps, speculators flee

LONDON: Copper prices crumbled to their lowest in 19 months on Tuesday after the dollar surged, drawing investment flows away from commodities as fears of recession continued to swirl.

Other industrial prices touched multi-month lows as equity markets and oil prices also skidded.

Three-month copper on the London Metal Exchange slid 4.5% to $7,648.50 a tonne by 1610 GMT, its lowest since December 2020 and down for a fourth straight session.

US Comex futures dropped 4.9% to $3.43 a lb.

“The base metals are still under a huge amount of pressure and we see more downside to come,” said Tom Price, head of commodities strategy at Liberum, adding that he expected copper to decline to $7,000 a tonne within three to six months.

The dollar index soared to the highest in two decades, making commodities priced in the US currency more expensive for buyers using other currencies.

“There’s no return on commodities so speculators are rotating their money out of commodities into US dollars, property, any US dollar asset outside of commodities that will give you a return,” Price said.

The speculative short position in LME copper has grown to the biggest since 2015, according to estimates by broker Marex. As of June 30, the short accounted for 43.6% of open interest versus the peak in 2015 of 72.2%, it said in a note.

Cities in eastern China tightened COVID curbs as coronavirus clusters emerged.

China will set up a state infrastructure investment fund worth 500 billion yuan ($74.7 billion) to spur infrastructure spending and revive a flagging economy.

Recession worries and consumer belt tightening have hit demand for electronic goods, which is feeding through to weaker consumption of soldering metal tin, but output cuts mean the market is likely to be balanced this year.

LME aluminium fell 3.3% to $2,384 a tonne after touching the weakest since June 2021, but nickel rebounded 0.7% to $22,650.

Zinc dropped 4% to $2,993 after hitting the lowest since September 2021, lead slipped 0.8% to $1,942 and tin slid 2.4% to $25,950.