LONDON: Copper slipped on Thursday ahead of an expected increase to interest rates by the European Central Bank, reminding investors of recession risk from aggressive moves to curb inflation.

Three-month copper on the London Metal Exchange (LME) lost 2% to $7,231 a tonne by 1000 GMT, erasing Wednesday’s 1.4% gain.

Copper has shed 33% since hitting a record peak of $10,845 in early March on fears that an economic slowdown in top metals consumer China and a potential global recession would curb metals demand.

“Clearly the focus of the market is now on demand destruction because of the rising recession risks,” said Julius Baer analyst Carsten Menke.

Though Menke does not expect a global recession, he added that increasing bearish sentiment means prices probably have further to fall.

Copper bounces on short-covering as China supports property sector

“The risks are clearly to the downside. Even though I think we have undershot, I would not bottom fish at these levels.”

Worries about economic risks were heightened by data on Wednesday showing U.S. housing starts in June fell to their lowest since September 2021 against the backdrop of decades-high inflation.

Aluminium was the best LME performer, with benchmark prices dipping 0.1% to $2,426.50, supported by continued concern over the impact on production from high energy prices.

Romania’s ALUM will halt output of aluminium raw material alumina for 17 months and lay off about 70% of its staff as soaring energy prices make production costs unsustainable, its owner said on Thursday.

U.S. aluminium producer Alcoa on Wednesday cut its guidance for this year’s alumina shipments.

Among other metals, LME zinc fell 2.3% to $2,938.50 a tonne, nickel shed 1.9% to $20,785, lead eased by 0.8% to $2,016 and tin was down 0.5% at $24,560.