Demand headwinds weigh on prices of industrial metals
LONDON — Industrial metal prices fell on
Thursday after the U.S. Federal Reserve hiked interest rates and
weak economic data from top consumer China highlighted the
deteriorating outlook for demand.
Benchmark copper on the London Metal Exchange traded
down 1.4% at $9,100 a tonne in official rings, while three-month
aluminum fell 2.6% to $2,524.
“Metals demand is at risk as accelerated monetary policy
tightening led by developed economies threatens to hamstring
economic growth and trigger a possible recession,” said Tom
Mulqueen, analyst at Amalgamated Metal Trading.
“Soaring inflation also threatens to curb consumer goods
spending as the rising cost of living hits disposable income and
U.S.: The Fed hiked interest rates 75 basis points on
Wednesday, the largest increase since 1994, to rein in soaring
inflation. The U.S. central bank expects to raise interest rates
steadily for the rest of 2022.
The European Central Bank last week signaled a string of
rate hikes from July, while the Bank of England raised rates 25
basis points to 1.25% on Thursday.
DATA: China’s new home prices fell for the second month this
year, depressed by still fragile demand as widespread COVID-19
curbs dented already weak buyer confidence.
“A China demand rebound from second quarter COVID-19
lockdowns could offer some respite, but is vulnerable to the
ongoing threat of new outbreaks and restrictions under China’s
zero-COVID approach,” Mulqueen said.
DOLLAR: Higher U.S. rates have boosted the U.S. currency,
which when it rises makes dollar-priced commodities more
expensive for holders of other currencies.
INVENTORIES: Low stocks in LME approved warehouses are
providing some support for industrial metals.
411,575, copper stocks
two-year lows, zinc stocks
lowest since April 2020 and lead stocks
tonnes are at 2007 lows.
PRICES: Zinc was down 1.8% at $3,577 a tonne, lead
gained 0.1% to $2,080, tin ceded 0.5% to $32,290
and nickel fell 1.1% to $25,575.
(Reporting by Pratima Desai; additional reporting by Brijesh
Patel in Bengaluru; Editing by Amy Caren Daniel)