LONDON: Copper prices on Wednesday fell to their lowest since November 2020 as data showing the highest US inflation in over 40 years bolstered the case for more interest rate rises that would restrain economic growth and metals demand.
The prospect of higher US interest rates pulled down stock markets and pushed the dollar to its strongest in 20 years, making dollar-priced metals costlier for non-US buyers and potentially dampening demand.
Weak demand in top consumer China due to COVID-19 lockdowns and slowing growth is also weighing on prices, with copper dropping more than 30% from a record high of $10,845 in March.
Benchmark copper on the London Metal Exchange (LME) was down 0.2% at $7,342 a tonne at 1555 GMT after slipping as low as $7,160.
“A high inflation number pushes for high interest rates which pushes towards recession,” said Saxo Bank analyst Ole Hansen. “Copper is not out of the woods yet.” Inflation is also rampant in Europe and elsewhere. Canada became the latest country to hike rates on Wednesday with a 1% increase, the largest since 1998.
Chinese customs data showed its copper imports rose 15.5% month-on-month in June and overall exports grew at their fastest pace in five months as pandemic-related restrictions eased.
However, a trader said Chinese demand remained weak, Yangshan import premiums have fallen to $64 a tonne from $76.50 at the start of July and analysts polled by Reuters downgraded their China growth forecast this year to 4%. Speculative investors are the most bearish on copper prices on the COMEX exchange since May 2020.
Analysts at Citi said they expected copper to fall to $6,600 within 6-12 months. “We recommend accumulating a short position in base metals,” they said.
Most other industrial metals prices fell. LME aluminium was down 0.1% at $2,358 a tonne, zinc fell 3.2% to $2,918.50, nickel slipped 1.1% to $21,145, lead rose 0.8% to $1,954 and tin was 0.6% lower at $25,425.