Copper prices softened to its lowest point since November 2020 as Chinese economic growth stumbled more than expected and mining giant Rio Tinto PLC warned that "headwinds are considerable" due to labour shortages, muted demand, falling commodity prices and the threat of recession.
Known as 'Dr Copper' for its ability to indicate the health of the global economy, the commodity suffered its worst weekly decline since the initial storms of the coronavirus pandemic.
Three-month copper on the London Metal Exchange fell below US$7,000 a tonne on Friday, down by more than a third over the past four months, with the Bloomberg Industrial metals index dropping to its lowest since early 2021.
Copper has given up gains made in the initial wake of Russia's invasion of Ukraine, which had led to traders fearing the conflict would lead to shortages of the metal.
However, the dominant concern is now about the waning global economic outlook and potential for a recession, which Rio Tinto said in a trading update was hitting prices for copper, aluminium and iron ore.
The FTSE 100 mining giant's update came on the same day that China reported vastly slower economic growth for the second quarter of 0.4%, well short of the 1.2% forecast and down from 4.8% in the first quarter.
The aluminium LME price dropped 32% to $2,397 per tonne at the end of the second quarter.
"When markets fall, all the bad news in the world seems to come out to help everything go lower
This summer is no exception as low liquidity and few new buyers allows prices to fall," said analyst John Meyer at SP Angel.
"This week is no exception," he said, pointing to higher inflation in the US leading to expectations of more big rate rises, pushing the economy into a standstill, while in China a new Omicron variant emerged and was met with new lockdowns in some regions.
Further economic fears are gripping the People's Republic, with homeowners threatening to withhold mortgage payments on unfinished apartments, sparking renewed fears of a real estate and banking crisis.
"At some point all the bad news will look like old news and new investment will flow back into equity markets," Meyer said.
He noted some positive signs being signs of a Chinese demand recovery as the country recovers from Covid lockdowns, plus the potential for a stimulus from Beijing, with a further US$45bn committed to infrastructure spending earlier this month.
In the long term, Meyer said the transition to global electrification bodes well for copper, as around 72% of consumption of the metal is currently used in the power and utilities sector.
In a production report for the second quarter, Rio Tino revealed iron ore output and deliveries were up 10% and 12% respectively compared to the first quarter of this year, with mined copper up 1%, but aluminium production was down 1%.
Full-year guidance for iron ore and copper was maintained, as for most metals, but aluminum, alumina and diamond guidance was trimmed slightly. Unit cost guidance for iron ore and copper remained unchanged.