Copper tumbled to a 20-month low as fears of a global recession hurt the demand outlook for the metal seen as an economic bellwether due to its wide range of uses.
The commodity, used in everything from power cables to electric motors, dropped as much as 3% to sink below $7,000 a ton. Prices are down 35% from a record high set just four months ago when investors worried that Russia’s invasion of Ukraine could disrupt supplies in an already tight market.
Now the focus has switched to demand concerns and the threats are stacking up. China — which accounts for half of all copper consumption — is struggling with the effects of Covid lockdowns, while Europe is battling an energy crisis. That’s happening as central banks around the world raise interest rates to fight soaring inflation.
“Unfortunately, right now trying to locate a hard bottom in copper is proving to be a difficult task,” Phil Streible, chief market strategist for Blue Line Futures LLC, said by phone. “China, rates, recession fears and supply chain issues are still there. The dominoes are falling.”
Copper was down 2.7% at $6,980 a ton by 9:43 a.m. on the London Metal Exchange. It has fallen 28% this year, heading for the biggest annual drop since 2008, the height of the financial crisis. The decline is part of a broader selloff in industrial metals, most of which also retreated on Friday.
Goldman Sachs Group Inc. this week forecast copper to trade at $6,700 in the next three months, a 22% downgrade from its previous outlook. The bank said a surging dollar will remain a headwind until macroeconomic risks subside.
Rio Tinto Group, a major copper supplier and the world’s second-biggest miner, added to warnings on the global economy. It said headwinds in China were “considerable” and that pressure on global supply chains needs to ease significantly before inflationary pressures soften.
China’s economy grew last quarter at the slowest pace since the country was first hit by the pandemic two years ago, underlining the impact of a Covid-Zero approach and a prolonged real-estate squeeze. Friday’s data showed no sign of improvement in the slump in China’s property investment that’s sapping confidence in a sector key for metals demand.
Sinking metals prices are also putting mining companies under pressure. Shares of copper producer Freeport-McMoRan Inc. have slid 40% this year, while Rio Tinto, BHP Group and Glencore have dropped in recent weeks.
Goldman Sachs warned that rising costs are making about 300,000 tons of global copper-mine capacity unprofitable. Capacity that was profitable at $6,270 a ton a year ago now won’t make money at $7,500.
In other base metals, nickel and zinc dropped at least 1.5% on Friday. An index of the six main LME metals was down 23% this year through Thursday. Benchmark steel prices in the US have slipped 37%, while iron ore has declined 20% in Singapore.
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