Copper Drops Over 8% This Month On Global Growth Concerns

Copper dropped to its lowest level since December on Thursday, extending losses this month, as escalating tensions in the Middle East pushed energy prices higher and raised concerns over global growth.

As of 1:17 pm, copper was down 1.1% at $12,262 a tonne in Shanghai trading. The metal has fallen more than 8% so far this month, reversing gains seen earlier in the year.

The decline came amid broad-based selling across industrial metals on the London Metal Exchange (LME), after Iran and Israel exchanged strikes targeting key energy infrastructure. Iran targeted the world’s largest liquefied natural gas plant, while Israel struck Iran’s South Pars gas field.

Energy Shock Weighs On Metals

The latest escalation in the Middle East has driven oil prices sharply higher. That has unsettled commodity markets, particularly metals tied closely to economic activity.

Also, the geopolitical tensions have triggered a risk-off mood across global markets. Industrial commodities, often seen as a proxy for economic health, have come under pressure. While copper extended to multi-month lows, aluminium and other metals also weakened.

Supply Risks Vs Demand Concerns

Traders now seem to weigh two opposing forces. On one side, there are concerns over supply disruptions. Energy infrastructure attacks in the Middle East could affect production, particularly in energy-intensive metals like aluminium. On the other hand, rising oil prices could hurt demand for metals.

At the same time, demand from China is likely to play a key role in price movement. Buying interest had already slowed in recent months, even before tensions in the Middle East picked up. That softer consumption had started weighing on prices earlier, and the recent geopolitical developments have only added to the pressure.

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Lower Prices May Result In Buying

The recent correction in prices could change demand dynamics. Market participants say lower prices may encourage buyers who had stayed away earlier due to high costs. Also, any pickup in Chinese buying could provide some support to prices in the near term. However, industry watchers feel that much can depend on broader economic conditions.

Sources

CNBC TV 18

Bloomberg

Financial Post