Whatās Going On Here?The price of copper hit its lowest in around 18 months on Friday, in a grim sign for the global economy. What Does This Mean?Hereās our elevator pitch for why you should care about copper: itās essential to everyday appliances, electric vehicles, construction, transportation, and infrastructure, and demand for the red metal is seen as a good way to gauge the health of the global economy. So somebody dial 911: the price of copper sank below $8,000 a ton on Friday ā its lowest since the world was still in the grips of the pandemic in early 2021. It could slip even more if the US and Europe end up stumbling into a recession, with analysts speculating that the supply of copper will be 10% higher than demand in the next couple of years. And to think, it wasnāt so long ago that the world was struggling to get its hands on the stockpiles it neededā¦ Why Should I Care?The bigger picture: Do your thing, China.
Copper investors are pinning their hopes on China to at least partially fill the hole in demand, and they might be onto something. For one thing, data out late last week showed that the countryās manufacturing activity grew in June for the first time in four months. And for another, the government announced $45 billion worth of support measures on Friday to finance infrastructure projects and boost the economy.
Zooming out: Europeans are in this for the long haul.
Itās not just copper either: an index tracking the prices of six "base metals" had its steepest quarterly drop since the 2008 financial crisis last quarter (tweet this). That makes them a bit of an outlier among commodities, with energy prices having risen by a record 42% in Europe last month. That pushed inflation in the region up to a record 8.6%, which some economists think will only come down to around 7.5% by the end of the year if the European Central Bank sticks to its current rate-hiking plan. | 