Pelosi’s visit to Taiwan is shaking up global copper markets, but slowing growth in China remains the biggest concern

Copper prices fell for a fourth day in a row on Thursday as tensions erupted between the United States and China as House Speaker Nancy Pelosi ended her visit to Taiwan, an island that China claims.

China is one of the largest metal consumers in the world. While heightened geopolitical tensions seem an unlikely catalyst for further copper selling, investors in base metals used in construction projects remain concerned that slowing global economic growth will dampen demand.

“Its recent decline has heightened concerns about a possible global recession,” said Boris Ivanov, global commodities expert and founder of Emeral Resources on Wednesday. “Bad economic growth in Europe, the United States and China and a deteriorating macroeconomic background will dampen demand for metals such as copper, and market performance will depend on how prices rise and fiscal stimulus measures.”

Three-month copper on the London Metal Exchange fell 3% to $7,677.50 a ton Thursday, posting losses for the fourth consecutive day, according to Dow Jones market data. While at the New York Mercantile Exchange, copper contracts for September delivery HGU22,
+ 1.57%
It lost 4 cents, or 1.1%, to trade at $3.43 a pound. In Asia, the most heavily traded copper contract for September fell 2.2% to close at $8,701.13 a ton.

US House Speaker Nancy Pelosi arrived in Taiwan on Tuesday for a trip that she said “respects America’s steadfast commitment to supporting Taiwan’s vibrant democracy” but also does not contradict China’s claims about the self-governing island. Pelosi was the largest American politician to visit the island in 25 years.

The visit, in defiance of Beijing and despite Biden’s warnings, prompted China to announce a series of military operations around the Taiwan Strait, escalating tensions between Washington and Beijing.

Read more: Why have tensions between China and Taiwan moved to the forefront of financial market concerns

Commodity prices, especially metals, have fallen sharply with lower demand due to weak consumption from the top market, China, but also from the impact of tight monetary policies around the world to combat rising inflation, according to Ivanov of Emirates Resources.

The Federal Reserve raised its benchmark interest rate by another 75 basis points a week ago on Wednesday in an effort to tame inflation. Federal Reserve Chairman Powell tried to reassure Americans that the United States may not be in a recession right now, even though second-quarter GDP data, released a day later showed the economy shrank 0.9% year-on-year in the three-year period. month from April to June, adding to fears that the economy may have already slipped into recession.

copper in july It fell to its weakest level in 20 months as global recession fears, disappointing China GDP and trade data continued to weigh on investor sentiment. China is one of the largest consumers and importers of refined copper, and is highly dependent on copper resources to meet its demand for construction and electric vehicle production.

A survey by the National Bureau of Statistics showed on Sunday that factory activity in China unexpectedly contracted in July after recovering from the previous month’s COVID-19 shutdown. The official manufacturing PMI fell to 49 from 50.2 in June, well below the 50-point record pointing to contraction.

Other data showed that sales at the country’s 100 largest real estate developers fell 39.7% year-on-year in July, while sales were down 28.6% from the previous month.

Over the past two decades, China’s push for infrastructure has increased demand for commodities, especially metals such as steel and copper. Ivanov explained that China imported more than 373,000 tons of refined copper in June, its highest monthly output this year. However, its economy has been affected by the policy of non-proliferation of the emerging Corona virus and the subsequent closures across major manufacturing centers and urban centers and problems in the debt-laden real estate market. The sector, a major source of demand for minerals, remains sensitive.”

MarketWatch reported last week that the real estate crisis in China will cause a sharp decline in the prices of base metals during the second half of the year, as the COVID-19 shutdown severely disrupts real estate construction, while many home developers remain trapped in a crippling debt crisis.

Meanwhile, precious metals futures contracts were mixed. Gold futures contracts expire in December GC00,
+ 0.09%

GCZ22,
+ 0.09%
It jumped $15, or 0.9%, to trade at $1,791.60 an ounce on Thursday. Silver for September delivery SIU22,
+ 0.54%
It fell 5 cents, or 0.3%, to $19.96 an ounce, according to market data from Dow Jones.

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