Base metals headed for the worst quarterly slump since the global financial crisis in 2008 as China’s economy recovered only gradually and fears of a world recession intensified.
The London Metal Exchange Index has tumbled 23% since the end of March, although the decline has been magnified due to prices spiking in March following Russia’s invasion of Ukraine. Tin has been the worst performer, plummeting 38%, while aluminum is down by around a third and copper has fallen by about a fifth.
A gauge of Chinese factory activity expanded in June for the first time since February, as virus controls were eased. The improvement was fairly muted, however, and a weak property market continues to weigh on metals demand. The Covid Zero policy also remains intact, despite a relaxation of quarantine rules, meaning there’s a constant risk of more restrictions if case numbers pick up again.
The looming threat of a recession in the US, and perhaps even globally, also continues to hang over the market. Federal Reserve Chair Jerome Powell and other central bankers warned the world is shifting to a regime of higher inflation at the European Central Bank’s annual forum in Portugal. At the very least, major economies are heading for an slowdown that will damp construction activity.
Metals were lower on Thursday. Zinc fell 1.3% to $3 315 a ton on the LME as of 11:37 a.m. in Shanghai. Copper declined 0.1% to $8 390, tin was down 0.1% and aluminum was steady. Despite the chunky quarterly drop, the LMEX gauge is only down 12% so far this year.