Base metals set for worst quarter since 2008 as recession fears mount

Base metals, including tin, aluminium and copper, are headed for the worst quarterly price dip since the 2008 global financial crisis (GFC), as fears of another global recession begin to mount.

The London Metal Exchange Index has fallen by 23% since the end of March, although the decline has been magnified due to prices spiking that month following Russia’s invasion of Ukraine.

Tin has been the worst performer, crashing by 38%. Aluminium is down by around a third, and copper has fallen by about a fifth. It will be the first quarterly decline for the entire index since the start of the COVID-19 pandemic in 2020.

While lockdown measures in China have begun to be eased in recent months, a weak property market continues to weigh on metals demand in the world’s number one base metals importing country.

China’s lockdowns have also caused severe knock-on impacts in Japan, where industrial output slumped 7.2% in May. The nation is Asia’s biggest importer of aluminium, and stockpiles of the metal in major ports have swelled to the highest in more than six years as automotive demand slumps due to supply chain constraints.

Meanwhile, the threat of recession in the US – the world’s largest economy – continues to hang over the market. Federal Reserve Chair Jerome Powell and other central bankers warned that the world is shifting to a regime of higher inflation during the European Central Bank’s annual forum in Portugal.

@RGNonline