Copper bears the burden of recession woes, China-linked pessimism at 20-month low

• Copper Price takes offers to renew multi-day bottom around late 2020 levels.
• Fears of economic slowdown joins chatters surrounding fresh lockdown in China to weigh on prices.
• Fears of higher production, anxiety ahead of the key data/event also exert downside pressure.

Copper Price remains on the back foot for the fifth consecutive day as bears cheer macro pessimism surrounding recession, as well as concerns over China’s covid conditions. That said, the red metal drops to the lowest levels since November 2020 as it takes offers around $3.34 heading into Wednesday’s European session.

Being the industrial metal, the latest fears surrounding global economic slowdown negatively affect the forecasts of the metal as the growth plans halt. On the same line were fears that the latest mass testing in China could recall lockdowns in top consumers.

Additionally, comments from Chinese Vice Foreign Minister Ma Zhaoxu, suggesting that China is willing to strengthen strategic coordination with Russia, also weighed on the Copper Price due to the metal’s risk barometer status. The reason could be linked to the fears that Beijing’s support to Moscow could only escalate the Russia-Ukraine crisis and exert more downside pressure on the global supply chain, which in turn intensified the recession woes.

Amid these plays, the three-month copper futures on the London Metal Exchange (LME) drops 2.5% to $7,483 a tonne, the lowest since November 27, 2020, whereas the most-traded August copper contract in Shanghai slumps 5.5% to 57,550 yuan ($8,582.76) a tonne by the midday break said Reuters.

“In 2022, supply-side may exceed the demand side in base metal complex. Investors are refraining to take a large position in this market as recession fears mount, said Vandana Bharti, assistant vice-president of commodity research at SMC Comtrade,” mentioned Reuters.

Additionally, hawkish bets on the major central banks’ next moves and upbeat US data also propel the risk-off mood, which in turn underpin the US dollar’s safe-haven demand and weigh on the copper prices. On Tuesday, the US Factory Orders for May, to 1.6% MoM versus 0.5% expected and upwardly revised 0.7% previous readings.

That said, the red metal is likely to remain pressured towards the late 2020 levels. However, today’s Federal Open Market Committee (FOMC) Minutes and the US ISM Services PMI for June, expected 54.5 versus 55.9 prior, will offer additional directions.

Technical analysis

Copper prices are vulnerable to testing November 2020 peak near 3.20 as it broke a horizontal area comprising levels marked during late 2020 to early 2021, around $3.50.