Chinese Copper is Witnessing the Worst Quarterly Performance In Over 24 Months

During the last week of June, the Copper prices descended and showcased their massive quarterly performance drop in China since the first quarter of 2020, plugged by the concerns over rising interest rates and curtailed demand outlook due to the infrequent lockdowns. As per market players, the Chinese economy is slowing due to the sporadic production shutdown in May and June, and on the other hand, the policy tensing around the world persists in weighing on the complex. Other commercial metals also had a significant quarterly drop in these 24 months, slipping between 15% and 45%. Market players anticipate further reductions in the near term as central banks continue to lift interest rates rapidly, choking growth.

Furthermore, the dollar index has edged closer to 103, near its 20-year high, and is on track to record its best quarter since 2017. As the USD strengthens, dollar-denominated metals become less appealing to buyers holding other currencies.

The looming threat of a recession in the United States, and possibly globally, continues to dominate the market. At the European Central Bank's annual forum in Portugal, Federal Reserve Chair Jerome Powell and other central bankers warned that the world is shifting to a higher inflationary regime. At the very least, major economies are experiencing a slowdown, which will reduce construction activity.

China's demand revival has been on the market's radar for months, with production activity in China ending a three-month drop in June. The Chinese authorities lifted a stringent lockdown in Shanghai, boosting production and new orders while the services sector recovered. Though manufacturing activity in China is picking up following prolonged COVID lockdowns in April and May, headwinds such as a subdued property market, soft consumer spending, and concern about recurring waves of infections remain.

Another concern is Japan's manufacturing activity, which fell most in May in two years due to China's COVID-19 lockdowns and raw materials shortages. Meanwhile, US Federal Reserve Chair Jerome Powell reiterated the central bank's hawkish outlook on Wednesday, citing rising inflation as a greater risk than slowing growth.

As per ChemAnalyst, "The Chinese Copper prices are anticipated to decline further owing to the muted demand outlook amidst the rising inflationary pressure."