On Tuesday, copper prices traded to a three-month low as the COVID-19 restrictions in top consumer China fueled worries about weaker growth, hitting metals demand.
Its benchmark futures on the London Metal Exchange declined 2.58% or 252.00 points to $9,517.50 per ton. This downward movement marks the lowest level since January 31.
The recent weak economic readings of the world’s second-largest economy have sparked concerns over global growth expectations. Moreover, the country produces about half of the global refined copper.
In addition, the slump in the Chinese main manufacturing sentiment index pulled the prices for essential metals.
The country’s Purchasing Managers’ Index (PMI) decreased to 47.40 points in April, well below the 49.50 in March. This key metric marks the weakest outcome since February 2020.
At the same time, it reflected a further contraction in the industrial sector. This soft outcome came amid a series of coronavirus lockdowns in major cities.
Then, Beijing currently leans on mass testing to immediately identify and isolate infections and avert a Shanghai-like lockdown.
These stricter restrictions will make it more challenging for China to meet its 5.50% economic growth target for 2022.
Accordingly, the current quarter appears broadly weak, with economists noting the possibility of a negative gross domestic product number.
In addition to the downsides, Peruvian indigenous communities occupying a key copper mine stated their conditions to the officials. The group said it would meet with company representatives if the government lifted its emergency order for the region.
The issue over the Las Bambas mine has placed uncertainty over the South American country’s massive mining sector. It marks significance in the market as it is one of the world’s most extensive copper quarries.
Copper, Iron Ore slumped on Tuesday
Like copper, iron ore contracts dropped 4.44% or 6.69 points to $144.08 per ton. It has skidded 8.50% from its peak since the start of the year. It previously benefited from Russia’s invasion of Ukraine, the fourth-largest exporter of the metal.
Consequently, iron ore inventories at Chinese ports jumped to 149.00 million tons in the week of April 29. Nevertheless, this figure is still down from February’s peak of 160.95 million tons.
Traders also looked forward to the meeting of the US Federal Open Market Committee later that day. Markets widely anticipated the American central bank to raise borrowing costs by half-a-percentage point.
This aggressive rate hike came at a time when both China and EU economies struggled. Eventually, this move is not great for the outlook for copper and iron prices.