(Bloomberg) — Metals prices declined as part of a broad commodities selloff that extended to agriculture, oil and natural gas as global growth risks and prospects of reduced U.S. stimulus roiled markets.
Copper sank to its lowest price since April and headed for its worst week in two months, while gold slipped and natural gas fell to a one-month low. The Bloomberg Commodity Spot Index, which tracks prices for 23 futures contracts, is on course for its worst week in two months. Growth woes helped a gauge of the dollar rise to the highest level since November, reducing commodities’ appeal for foreign investors.
Commodities are “all suffering” partly because the Fed’s upcoming reduction of asset purchases will “remove some of the liquidity, and probably remove some incentives to go on with the whole reflation trade,” said Bart Melek, head of commodities strategy at TD Securities. “The market is looking at these, and say less demand, less liquidity, maybe I should take some profits and take some money off the table.”
Metals markets have been pressured by ongoing concerns over growth in top consumer China, worries that the Federal Reserve may soon start curbing massive stimulus that helped drive prices higher over the past year. The fast-spreading delta coronavirus variant is adding to investor anxiety, with recent soft data in the U.S. and China suggesting the global economic recovery is stalling.
Copper, considered an economic barometer, dipped below $9,000 a ton on Thursday, and tin tumbled as much as 11% as all base metals declined. Precious metals slid as well, led by palladium and platinum.
Mining stocks also moved sharply lower, with BHP Group, Rio Tinto Group, Glencore Plc and Antofagasta Plc down more than 3%. Oil buckled, retreating below $65 a barrel to the lowest since May, and grains and soft commodities fell too.
Most Federal Reserve officials agreed that they could start slowing the pace of bond purchases later this year given the progress made toward inflation and employment goals, according to minutes of the Federal Open Market Committee’s July gathering that were released Wednesday. The commentary boosted the dollar and Treasuries.
The Bloomberg Dollar Spot Index was up 0.3% after gaining as much as 0.5% to the highest in nine months.
Copper slumped as much as 3.5% and was trading down 1.5% to $8,903 a metric ton by 4:55 p.m. on the London Metal Exchange. It’s down 7% this week, set for its worst week since June. The material reached an all-time high of more than $10,700 in May.
Iron and Steel
Iron ore closed 12% lower in Singapore on Thursday, the lowest since December. The price of the steelmaking material gained 3.3% to $134.85 a ton in the overnight session after initially jumping more than 11% to above $145 a ton.
“Iron ore remains the most China-centric of all commodities, so when economic activity slows, the virus spreads and supply lines are being disrupted, iron ore will be in the firing line,” said Ole Hansen, head of commodity strategy at Saxo Bank A/S.
China has repeatedly urged steel mills to curb output to cut back on pollution, with a drop in July’s production signaling that measures are starting to take effect. Some major producers have already made arrangements to reduce supply, while mining giant BHP this week said that the increasing likelihood of stern cuts this half is “testing the bullish resolve of the futures markets.”
Iron ore’s slump has spilled over to steel, with prices falling on expectations Chinese demand will wane. The country’s moves to rein in the property market and curb surging prices saw home-prices grow at the slowest pace in six months.
“Steel prices globally have started to cool as we expected, and we hold on to our view that there will be further easing of prices for the remainder of 2021 and into 2022 as Chinese demand from the construction industry weakens,” Fitch Solutions said in a note.
Grains markets fell across the board, reacting to a stronger dollar as well as better weather forecasts and strong yield prospects for corn and soy in several key states. Cotton, sugar, coffee were also caught in the downdraft, all down for the day at ICE Futures U.S. in New York. The three crops have been trading near multiyear highs.
Oil slumped to its lowest level since May and is on course for a sixth straight decline, the longest losing streak since February 2020. U.S. natural gas futures hit a one-month low with prices sinking as much as $3.734 per metric million British thermal units. Mild temperature forecasts and above-average inventories have eased demand and lowered natural gas prices heading into the weekend.
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