LONDON: News of possible stimulus in China pushed copper prices up sharply on Thursday from the previous day’s 20-month low, but many analysts expect further declines as rising interest rates stifle global economic growth.
Benchmark copper on the London Metal Exchange (LME) was up 4.5% at $7,858 a tonne at 1600 GMT after Bloomberg News reported that China, the biggest metals consumer, was considering $220 billion of stimulus measures.
Gains were fuelled as traders were forced to buy back positions after they had ramped up bets on lower prices, analysts said.
Copper is on course for its biggest daily gain since September 2018, but it is still down nearly 3% this week and almost 30% below the record high of $10,845 seen in March.
On Wednesday prices touched $7,291.50, their lowest since November 2020.
“Copper is most exposed to an economic slowdown and prices could fall below $6,000 per tonne in the coming months in our base case,” Bank of America analysts wrote in a research note.
“If Europe runs out of gas, a risk, prices could decline to $4,500 per tonne.”
MARKETS: Global shares rose but are still down about 20% this year.
INTEREST RATES: Central bankers are determined to raise rates to bring soaring inflation under control.
RECESSION: The head of the International Monetary Fund (IMF) said the economic outlook had “darkened significantly” and a possible global recession next year could not be ruled out.
FACTORIES: German industrial production rose less than expected in May, adding to a run of weak manufacturing data around the world.
DOLLAR: The dollar is near 20-year highs and expected to remain strong for at least the next three months, making dollar-priced metals costlier for non-US buyers.
CITI: “A timely and decisive rollout of stimulus measures (over and above what has been announced) from China is required to support prices at current levels,” Citi analysts said in a note. “Without it, prices will grind lower.”
PRICES: Aluminium rose 1.6% to $2,447 a tonne, zinc was up 3.6% at $3,106, nickel slipped 1.1% to $21,595, lead was 0.1% up at $1,972 and tin advanced 4.5% to $25,830.