Copper sinks to 17-month low as slowdown fears mount

Copper sinks to 17-month low as slowdown fears mount
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BENGALURU (July 4): Copper prices dropped to a fresh 17-month low on Monday (July 4) as renewed lockdowns in top consumer China and the prospects of aggressive rate hikes stoked fears of a global economic slowdown, denting demand for metals.

Three-month copper on the London Metal Exchange (LME) was down 1.4% at US$7,938 (about RM35,030.39) a tonne as of 0717 GMT after hitting its lowest since early February 2021 at US$7,918 earlier in the session. 

The most-traded August copper contract in Shanghai ended daytime trading down 3.1% to 60,660 yuan a tonne.

"Softening demand and concerns over a growth slowdown are dragging on the sector. We think improving Chinese economic activity will stabilise prices," ANZ analysts said in a note.

"Inventories for metals are shrinking to multi-year lows. Supply challenges due to higher energy prices and other operational issues will allow little room for inventories build." 

From the US to the eurozone, activity at factories slowed to levels last seen during the initial wave of the pandemic.

Adding to demand worries, cities in eastern China tightened Covid-19 curbs on Sunday as coronavirus clusters emerged, posing a new threat to the country's economic recovery under the government's strict Covid zero policy. 

Inflation: Eurozone inflation hit a record high in June as price pressures broadened, and its peak could still be months away, firming the case for rapid European Central Bank rate hikes starting this month. 

Fed: The US Federal Reserve is widely expected to deliver another 75-basis-point rate hike this month to combat soaring inflation. 

Dollar: The dollar hovered close to recent two-decade highs against its rivals, making greenback-denominated metals more expensive for other currency holders.

Zinc: Analysts at Citi Research in a note said "zinc looks like the next shoe to drop in the near term, with positioning having been relatively resilient and likely to crack imminently, and with prices the furthest from costs".

Prices: LME aluminium gained 0.3% to US$2,451.50 a tonne, zinc was up 0.8% at US$3,054, and lead fell 1.2% to US$1,912, nickel gained 2.6% to US$22,380 and tin lost 1.7% to US$26,210.

Shanghai aluminium edged 0.1% higher, zinc slipped 1.3%, nickel fell 2.1%, lead was flat and tin gained 0.2%.