Copper nears 4-1/2-month low as recession jitters dampen demand outlook

US data shows job growth falls short of expectations and the unemployment rate rises, sparking hopes for a rate cut from the Federal Reserve

By Reuters

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A worker monitors ore processing of Codelco El Teniente copper mine, the world's largest underground copper mine, in Rancagua, Chile July 30, 2024. -- Reuters

Published: Tue 6 Aug 2024, 10:23 AM

Copper prices in London traded on Tuesday near the lowest since March, pulled down by a weak consumption outlook amid fears of a U.S. recession, though tight mine supply and demand growth potential from the energy transition sectors limited losses.

Three-month copper on the London Metal Exchange (LME) was down 0.8% at $8,817 per metric ton, as of 0531 GMT. The contract was hovering near a 4-1/2-month low of $8,714 hit on Monday and down 21% from a record high scaled in May.

The most-traded September copper contract on the Shanghai Futures Exchange (SHFE) tumbled as much as 3.3% to 70,630 yuan ($9,880.53), its lowest since March 13.

On the COMEX, fund managers reduced their net long positions for copper to 9,449 contracts by July 30, an 87% drop from May 21.

U.S. data showed job growth fell short of expectations and the unemployment rate rose, pointing to a greater vulnerability to recession and sparking hopes for a rate cut from the Federal Reserve.

"Nevertheless, we still see a soft landing and the imminent Fed rate cut will be supportive for metal prices to stabilise," said analyst Soni Kumari of ANZ.

"Challenges in copper mine supply are likely to keep the concentrate market tight and subsequently reduce the output of refined copper, particularly in China," Kumari added.

"Energy transition will likely provide cushioning for any economic meltdown to metals such as copper and aluminium."

The premium to import copper into China rose to $48 a ton on Monday, the highest since March 18, suggesting an improvement in import demand from China.

LME aluminium eased 0.3% to $2,244 a ton, nickel edged down 0.4% at $16,210, zinc dipped 0.7% to $2,614, while tin was flat at $29,485 and lead was nearly flat at $1,932 after tumbling 4.6% in the previous session.

SHFE aluminium fell 1% to 18,790 yuan a ton, nickel dropped 1.3% to 128,700 yuan, zinc declined 2% to 22,080 yuan, lead shed 4% to 17,155 yuan and tin decreased 2.2% to 242,250 yuan.