On Friday, copper prices traded to a two-year low on heightened fears of a global recession. The commodity may still have room to fall before its role in renewable energy provides long-term support.
Accordingly, the US futures of the red metal skidded by 2.73% to $3.47 per pound. Similarly, London contracts edged down 1.49% to $7,707.00 per metric ton.
Analysts consider copper as an economic bellwether because of its various usage in many industries. For example, the metal is commonly used in construction, household appliances, and electric vehicles.
Thus, the slumping prices mirror the broad sour outlook as jitters mount over a global economic slowdown. The market also reflects the impact of the Federal Reserve interest-rate hikes and rising inventories.
Moreover, the disruption in the energy markets due to the geopolitical crisis in Ukraine has stolen the focus on copper’s role in greener technologies. As a result, policymakers scramble to have energy needs met, turning away from the perceived massive demand for the metal.
In addition, another weighing factor for copper prices is the strict lockdowns in China. Experts anticipated the restrictions to have a potential impact on economic activity. Beijing remains the largest consumer of the industrial metal, exacerbating traders’ eagerness to de-risk.
Copper’s upside on Chinese Fiscal Stimulus Plan
Meanwhile, analysts see upside potential for copper as China prepares to ramp up infrastructure spending again. This plan aims to revive the country’s economy hobbled by COVID-19 cases.
Reports have shown that the Chinese Finance Ministry currently considers accelerating a $220.00 billion worth of debt issuance this year. Furthermore, Beijing officials are under pressure to prop up the economy. President Xi Jinping has refused to counter any cut to the official growth target of 5.50% for 2022.
Like copper, London aluminum futures plunged 1.54% to $2,405.00 per metric ton. Similarly, the LME nickel decreased 1.56% to $21,198.50 per metric ton.