LONDON: Copper prices touched the lowest in nearly three months on Thursday after US economic growth unexpectedly went into the red, fuelling fears about weaker global growth knocking metals demand.
US gross domestic product fell at a 1.4% annualized rate last quarter, while economists had expected growth rising at a 1.1% rate, data showed on Thursday.
Benchmark three-month copper on the London Metal Exchange (LME) was down 1.7% to $9,687 a tonne at 1600 GMT after touching the lowest since Feb. 1.
“Demand and recession fears took hold,” Al Munro at broker Marex said in a note.
Currencies also pressured the metals markets as the US dollar index surged to its highest level in two decades, meaning that dollar-denominated metals would be expensive for buyers using other currencies.
While a strong dollar is typically regarded as negative for commodities, Gianclaudio Torlizzi, partner at Milan consultancy T-Commodity, said the currency of top metals consumer China is more important.
“A weakening yuan is bearish for base metals and there’s expectation that the yuan can weaken a bit more, so that will continue to pressure base metals,” he said.
The yuan dropped to almost 17-month lows against the US dollar on Thursday.
Extended COVID-19 lockdowns in top metals consumer China have fanned fears over metals demand while a gas crisis in Europe could hit economic growth there.
The termination of Russian gas supplies to Poland and Bulgaria on Wednesday raised concerns that more states could be hit, especially Germany.
“If Russia stops gas supplies to Europe, that would cause a recession, but so far this isn’t the main scenario,” Torlizzi added.
The global economy will expand more slowly than predicted three months ago, according to Reuters polls of more than 500 economists.
Peruvian police on Wednesday said they had evicted an indigenous community that set up a camp inside a huge open pit at the Las Bambas copper mine, forcing operations to be halted.
LME aluminium declined 2.2% to $3,025 a tonne, lead fell 1.3% to $2,251.50, zinc slid 2.4% to $4,118, nickel shed 1% to $32,975, but tin added 0.2% to $40,065.
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