Copper tumbles as rising interest rates exacerbate demand fears

Copper prices slid to their lowest level in nearly two months on Friday on a strong dollar and fears of recession-hit demand for the metals after further interest rate hikes.

The three-month CMCU3 copper on the London Metal Exchange (LME) had fallen 3.2% to $7,430 a tonne by 10:00 GMT for its lowest level since July 25.

“The macroeconomic outlook is hitting industrial metals quite hard. The main worry is that central banks are allowing the economy to slide into recession in an attempt to get inflation under control,” said Ole Hansen, head of commodities strategy at Saxo Bank in Copenhagen.

Now that copper is below $7,475 a tonne, traders will be watching the 20-month low of $6,955 hit on July 15, he added.

Other risky assets were swept away by the sell-off as stocks hit two-year lows after investors realized aggressive US interest rate hikes were likely to continue longer than expected.

The dollar=USD index hit its highest level in two decades, making commodities denominated in US dollars more expensive for buyers using other currencies.

Tighter supply and rising demand in China, however, have recently supported metal prices.

“The power grid and new energy sectors have increased their orders for copper products,” said a China-based copper producer.

Physical markets also saw increased demand as producers sought to replenish stocks ahead of the Chinese National Day holiday from October 1-7.

But those bullish elements were swept aside by broader economic concerns, with rising copper stocks at the LME also dampening the mood after climbing a fifth over the past week.

Among other metals, aluminum LME CMAL3 fell 1.9% to $2,186 a tonne, zinc CMZN3 fell 2% to $3,045, lead CMPB3 fell 0.9% to $1,835 , CMNI3 nickel lost 3.6% to $23,675 and CMSN3 tin fell 2.7% to $21,070.
Source: Reuters (Reporting by Eric Onstad Additional reporting by Siyi Liu and Dominique Patton in Beijing Editing by David Goodman)

Leslie M. Gill