Copper prices have tumbled to 16-month lows on fears of sharp slowdown
A version of this story first appeared in CNN Business' Before the Bell newsletter. Not a subscriber? You can sign up right here. You can listen to an audio version of the newsletter by clicking the same link.
New York (CNN Business)Some investors look to copper prices as a bellwether for the global economy. If you're one of them, you have good reason to be worried.
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What's happening: Copper prices hit 16-month lows on Thursday as traders dumped the metal. They've dropped more than 11% in two weeks.
"Copper prices are just starting to account for the fact that global growth is slowing," Daniel Ghali, director of commodity strategy at TD Securities, told me.
The metal is used in many construction materials, including electrical wires and water pipes. That means it's often viewed as a proxy for economic activity, since demand tends to heat up when the economy is expanding and cool when it's contracting. It's affectionately referred to as "Dr. Copper" among traders because of its alleged talent for prognostication.
Earlier this year, after Russia invaded Ukraine, the price of copper shot up, along with other major metals. (Before the Bell readers will recall that the disarray led the London Metal Exchange to temporarily halt the trading of nickel in March.)
Russia accounts for 4% of global copper output and almost 7% of nickel output, according to S&P Global. Traders were nervous that supply could run short just as the economic recovery from the pandemic was ramping up, and they started hoarding aggressively.
Now, as recession fears take hold, prices are heading in the opposite direction.
"Once that stockpiling impulse ended, then global commodity demand started to reconnect with global growth," Ghali said.
This just in: The first look at a closely-watched economic gauge for June affirmed that economic activity is sliding into a lower gear as high food and fuel prices bite.
The Purchasing Managers' Index released by S&P Global on Thursday found that private sector output slowed "sharply" in the United States this month.
"Having enjoyed a mini-boom from consumers returning after the relaxation of pandemic restrictions, many services firms are now seeing households increasingly struggle with the rising cost of living, with producers of non-essential goods seeing a similar drop in orders," said Chris Williamson, chief business economist at S&P Global Market Intelligence.
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