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COPPER PRICES PLUNGED AMID GLOBAL INTEREST RATE HIKES, LOCKDOWN & FACTORY SLOWDOWN IN CHINA

Harvest Global Markets :

Copper prices surged on Monday as the market opted for riskier assets against the weak dollar. Still, China was hit with a manufacturing slowdown, limiting the upside movement of the product. LME copper was up on Monday and generated the highest price since July 5 ($7.955/tonne). An increase in the interest rates across the global economies dropped the industrial metal prices against a slowdown in industrial activities. This combined with the covid lockdown in China put downside pressure on the metal.

Copper prices resurged in the hopes that the US Fed would consider less monetary tightening practice in the upcoming meeting with the expectations of a 50 basis points rate hike instead of 75 bps. Additional supporting fundamental is China’s decision to stimulate the economy after being hard hit by coronavirus lockdown. Global equities hit seven-week highs on Monday and the dollar fell to a one-month low, helping dollar-priced metals by making them cheaper for buyers with other currencies.

If the Fed can slow down on rate increases and China does what it has promised, it’s looking better and better, adding that stocks of metal are low and supply constrained. Industrial metal demand is muted amid weak factory reports in Asia & Europe in the month of July, suggested a fear of recession.

China is said to be the biggest consumer of Copper but after a recent slowdown in manufacturing in addition to a slump in the property sector, metal demand depleted. Speculators in copper on the COMEX futures exchange are still betting that prices will fall. However, Chinese officials have promised to support troubled sectors and stimulate growth, with signs emerging that demand there is increasing. Yangshan copper import premiums have risen to $94 a tonne, their highest since December, pointing to increased demand for the overseas metal.

Stockpiles in Shanghai Futures Exchange (ShFE) warehouses, at 37,025 tonnes, are close to December’s 12-year low of 27,171 tonnes. LME aluminium was down 1.9% at $2,441 a tonne, zinc fell 0.3% to $3,299, nickel advanced 3.1% to $24,345, lead gained 0.7% to $2,049 and tin was up 1.8% at $25,500.

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