Copper price slips on China lockdown worries
The copper price slipped on Monday as covid-19 lockdowns in China and prospects of aggressive US rate hikes fuelled recession fears.
Copper for delivery in July fell 4% from Friday’s settlement price, touching $4.23 per pound ($9,307 per tonne) midday Monday on the Comex market in New York, the lowest since December 1.
The official Purchasing Managers’ Index (PMI) fell to 47.4 points in April, down from 49.5 in March and the weakest outcome since February 2020, China’s National Bureau of Statistics said on April 30.
It was the second straight month for the index below the 50 mark separating growth from contraction, and the soft outcome came amid a series of coronavirus lockdowns in major cities, including Shanghai.
There are worries that China’s strict zero-covid policy means more cities will be locked down, including the capital Beijing, with restrictions lasting for longer than the market had initially expected.
Beijing closed some schools and public spaces on Thursday, as most of the Chinese capital’s 22 million residents turned up for more mass covid-19 testing aimed at averting a Shanghai-like lockdown.
“The ongoing lockdowns will make it more challenging for China to meet its 5.5% economic growth target for 2022, especially since the current quarter appears likely to be weak, with some economists saying a negative gross domestic product number is a possibility,” wrote Reuters columnist Clyde Russell.
US Federal Reserve officials have aligned around plans to accelerate the pace of interest rate hikes this year but remain split over what could be the make-or-break decision of where to stop to avoid dragging the economy into recession.
Data showed the US economy unexpectedly contracted in the first quarter amid a resurgence in covid-19 cases and a drop in pandemic relief money from the government.
Fund managers have been increasing bearish bets on the CME copper contract over the last couple of weeks.
