Pelosi’s visit to Taiwan rattles global copper markets, but slowing growth in China remains biggest concern

Copper prices fell for the fourth straight day on Thursday as tensions between the United States and China erupted as House Speaker Nancy Pelosi wrapped up her visit to Taiwan, an island China claims as its own. territory.

China is one of the biggest consumers of metals in the world. While rising geopolitical tensions seem an unlikely catalyst for another copper selloff, investors in base metals used in construction projects remain concerned that a slowdown in global economic growth could dampen demand. .

“Its recent decline has added to wider concerns about a possible global recession,” Boris Ivanov, global commodities expert and founder of Emirates, said on Wednesday. “Lackling economic growth in Europe, the United States and China and the deteriorating macroeconomic backdrop will dampen demand for metals like copper, and its performance in the market will depend on how rate hikes and stimulus measures budget will take place.”

Three-month copper on the London Metal Exchange fell 3% to $7,677.50 a tonne on Thursday, posting a fourth consecutive day of losses, according to Dow Jones Market Data. While on the New York Mercantile Exchange copper contracts for September HGU22 delivery,
+0.53%
fell 4 cents, or 1.1%, to trade at $3.43 a pound. In Asia, the most traded copper contract in September fell 2.2% to close at $8,701.13 a tonne.

Speaker of the United States House of Representatives Nancy Pelosi arrived in Taiwan on Tuesday for a trip that she said “honors America’s unwavering commitment to supporting Taiwan’s vibrant democracy,” but does not Nor has it contradicted China’s claims to the self-governing island. Pelosi was the highest ranking American politician in 25 years to visit the island.

The visit, in defiance of Beijing and despite Biden’s warnings, prompted China to announce a series of military operations around the Taiwan Strait, heightening tensions between Washington and Beijing.

Read more: Why China-Taiwan tensions have risen to the forefront of financial market concerns

Commodity prices, especially metals, fell sharply as demand fell due to weak consumption in the biggest market, China, but also the impact of tighter monetary policies around the world to combat rising inflation, according to Ivanov of Emirates Resources.

The Federal Reserve raised its benchmark interest rate an additional 75 basis points a week ago on Wednesday in a bid to keep inflation under control. Fed Chairman Powell tried to assure Americans that the United States is probably not in a recession right now, even though second quarter GDP data, which was released a day later, was showed the economy shrank by 0.9% on an annualized basis in the three-month period from April to June, intensifying fears that the economy had already slipped into recession.

Copper in July fell to its lowest level in 20 months as global recession fears and disappointing GDP and trade data from China continued to weigh on investor sentiment. China is one of the largest consumers and importers of refined copper and relies heavily on copper resources to meet its demand for construction and production of electric vehicles.

Chinese factory activity contracted unexpectedly in July after rebounding from COVID-19 lockdowns the previous month, a National Bureau of Statistics survey showed on Sunday. The official Manufacturing Purchasing Managers’ Index fell to 49 from 50.2 in June, falling below the 50 benchmark mark, indicating contraction.

Other data showed sales for the country’s top 100 property developers fell 39.7% year-on-year in July, while sales were down 28.6% from the previous month. .

“Over the past two decades, China’s infrastructure surge has fueled demand for raw materials, especially metals like steel and copper. China imported more than 373,000 tonnes of refined copper in June, its highest monthly figure this year,” Ivanov explained. “However, its economy has been affected by its zero COVID policy and the series of closures that followed in major manufacturing and urban centers and the problems in their debt-ridden real estate market. The sector, a key source of demand for metals, remains delicate.

MarketWatch reported last week that China’s housing crisis will lead to a more severe drop in base metal prices in the second half of the year as COVID-19 lockdowns have severely disrupted housing construction, while many property developers are still trapped in a crippling debt crisis.

Meanwhile, precious metals futures were mixed. Gold futures contracts expiring in December GC00,
+1.79%

GCZ22,
+1.79%
jumped $15, or 0.9%, to trade at $1,791.60 an ounce on Thursday. Money for September delivery SIU22,
+1.29%
fell 5 cents, or 0.3%, to $19.96 an ounce, according to Dow Jones Market Data.

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