Concerns loom over the possibility of the steepest fall in global copper prices since the financial crisis amid concerns over a global economic recession

Copper producers say, “Prices are expected to be strong despite a recent rapid decline”

The Bloomberg reported on June 26 (local time) of the possibility of a biggest quarterly fall in metal prices, including copper and zinc prices, since the 2008 financial crisis. The price of copper - a key leading indicator that reflects the trend of the real economy - fell to $8,112.50 per ton on June 24 at the London Metal Exchange (LME). This is the lowest level in 16 months.

There are projections copper prices can suffer the biggest monthly fall in three decades as copper prices plummeted by 11% this month, which skyrocketed to its highest level only four months ago. Zinc prices also declined as well. Zinc prices fell 21% last week, which is more than a 50% decline compared to its highest level posted in March. Nickel prices fell by 13% last week and aluminium was not exempt from the ongoing tendency  of falling prices of industrial metals. Consequently, this resulted in the Bloomberg Industrial Metals Index - a reference that reflects the direction of prices of industrial metals - plummeting by 26% this quarter, which heightens the possibility of posting the biggest quarterly fall since the initial stage of the financial crisis unfolded in late 2008. 

The Bloomberg reached to a conclusion that metal prices suddenly entered a downward trajectory recently after prices skyrocketed due to growing optimism for an economic recovery after the lifting of Covid restrictions and supply chain disruptions. It analyzed metal prices plummeted as the market anticipated the Federal Reserve will maintain robust measures to implement tight monetary policies, including a measure to hike benchmark interest rate by 0.75 percentage points earlier this month, led to concerns of an economic recession and a decrease in demand.

Additionally, China’s diminishing demand became a factor contributing to decreasing metal prices. The Bloomberg explained metal prices may see an additional decline as a growing number of investors forecasted a continuous decline of metal demand.

On the other hand, some view that metal prices are expected to be strong in the future considering that the stock of metals is still insufficient and an expansion of supply is far being materialized for the time being. Maximo Pacheco, the Chairperson of the board of directors of Codelco - a Chilean state-owned company and the world’s largest copper producer - highlighted in his interview with the Reuters that the underlying situation in the market is an important factor to be taken into account in a situation where the market is seeing extreme short-term fluctuations of prices.

He forecasted copper price will remain strong into the future considering that global copper supply is lagging behind global demand. He also cited a policy to maintain annual copper production target by the company at 1.7 million tons during his tenure, including this year.