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The prices of copper and other base metals slumped on Tuesday on rising worries that an economic downturn will curb metals demand, as the dollar strengthened closer to fresh multi-year highs.
An uptick in COVID cases in top metals consumer China also weighed on the market.
Three-month copper on the London Metal Exchange shed 1.3% to $7,481.50 a tonne by 1000 GMT while aluminium fell 2.7% to $2,198 a tonne.
LME copper has slid 31% since touching a record peak of $10,845 in March as central banks ramped up interest rates to dampen inflation and COVID lockdowns in China have exacerbated sluggish economic growth.
“I think the market got a bit complacent last week regarding a pivot, but that quickly subsided,” said Amelia Xiao Fu, head of commodity market strategy at Bank of China International.
She was referring to investor hopes that the U.S. Federal Reserve would back off from rate hikes and signal a cut.
“The market should be prepared for further tightening policies, not only by the Fed, but other major global central banks, so that will cap any price advances in the metals space,” Fu said.
A litany of Fed officials warning about rate rises continued, with the vice chair saying on Monday the bank was clear on the need for restrictive monetary policy and the full brunt of tighter policy would not be felt for months to come.
Those kind of comments have boosted the dollar index, which makes commodities priced in the U.S. currency more expensive for buyers using other currencies.
Also dampening the market was news that Shanghai and other big Chinese cities have ramped up testing for COVID-19 as infections rise, with some local authorities hastily closing schools, entertainment venues and tourist spots.
China’s upcoming Communist Party Congress starting Oct. 16 would also keep investors trading cautiously, said analyst Zenon Ho at broker Marex. “People will want to be lightly positioned into such a key event’’.
In other metals, LME zinc declined 1.5% to $2,919 a tonne, nickel CMNI3 dipped 0.3% to $22,335, lead eased 0.8% to $1,973.50 and tin shed 0.4% to $20,015.