Copper extends losses on fears of weaker economic growth
06:09, 20 October 2021
Copper prices fell for a third consecutive day on Wednesday on fresh concerns about slowing economic growth in Asia.
On the London Metal Exchange, copper prices fell 1.6% to $9,986.75 a tonne, after the International Monetary Fund (IMF) lowered its forecast for Asia’s economic growth for the remaining months of 2021. Copper, used in electrical and telecommunication wiring as well as construction, is a gauge of the economy's health.
“Rising commodity prices could accelerate inflation, worsen supply chain bottlenecks and subsequently be a drag on global growth,” analysts at ANZ Research said in a note on Wednesday.
Slower growth expected in Asia
On Tuesday, the IMF cut its forecast for Asia’s economic growth to 6.5% for 2021, from a 7.6% expansion in its April forecast due to Covid-19.
The lower forecast for Asia’s economy comes amid increased concerns about the health of the global economy as power shortages hit countries from Asia to Europe due to record energy prices.
The negative sentiment spread across the industrial metals complex. Aluminium fell by 2.46%, nickel dropped by 0.64%, and tin traded 1.36% lower. Zinc was almost flat, and lead dropped by 1.18%.
Base metals feel the pinch
“The power shortages are impacting both sides of the industrial metal markets. Supply disruptions dominate, despite rising concerns of weaker economic growth,” said ANZ Research’s analysts.
Power shortages have been impacting supply of industrial metals in China and in Europe.
In China, copper smelters reduced their utilisation rate in September due to the country’s power rationing, leading to a fall in refined copper output for September by more than 5% year-on-year ANZ Research’s note show.
Aluminium falls to 13-month low
China’s aluminium production plunged to 13-month low in September due to power shortages and emission curbs.
“This is keeping the spot premium high across key regions. Slowing offtake from downstream sectors is building up inventories,” ANZ Research added.