Zinc led a decline in industrial metals after a slump in China’s economic activity added to signs of weakening demand in the world’s No. 2 economy, while a rebound in the dollar made commodities priced in the currency more expensive.
Prices for the galvanizing metal slumped to the lowest since March 2021 after data on Monday showed China’s factories and services activity contracted as Covid curbs and the crisis in the property market continue to pressure the world’s biggest metals-consuming country.
Zinc’s losses tracked a steep sell-off in iron ore and steel markets, as China’s economy shows few signs of a decisive recovery and its steelmakers face deepening losses.
[Click here for an interactive zinc price chart]
Elsewhere, the dollar climbed as traders position for a policy decision by the Federal Reserve this week. Economists surveyed by Bloomberg expect central bank officials will raise rates by 75 basis points for a fourth consecutive meeting, laying the groundwork for interest rates reaching 5% by March 2023 and potentially leading to a US and global recession.
In the copper market, traders were weighing the fragile economic outlook against ongoing signs of tight supply in China. More than half of the copper in warehouses on the London Metal Exchange — much of it of Russian origin — has been ordered out for delivery and is mostly heading to Chinese buyers, according to people familiar with the matter.
Yet in the market for mined copper concentrates, a global surplus of the raw material is expected to lift annual processing fees to near their 2015 peak, according to researcher Mysteel. In time, that could help alleviate the tightness in the Chinese market.
LME zinc fell as much as 4.2% to $2,702.50 a ton, hitting the lowest level since March 2021. It traded at $2,716.50 a ton at 10:42 a.m. local time, while copper was down 1.4% at $7,447 a ton. Lead rose 1.2%, extending gains seen on Friday after its inclusion in the Bloomberg Commodity Index.
Comments