Metals Poisoned by Turkey Contagion as Copper Nears Bear Market

(Bloomberg) -- From Turkey’s financial crisis to China’s trade war, the emerging-market contagion is infecting metal markets.

Base metal markets tumbled on Wednesday, with most contracts falling more than 2 percent in London. Copper sank below $6,000 a metric ton and is set to close in a bear market. Not even gold, the usual safe haven, was spared from the selloff. Palladium plunged 5 percent and the FTSE 350 Mining Index sank to a four-month low.

“It’s going to be difficult to shake this bearish sentiment,” Nicholas Snowdon, a metals analyst at Deutsche Bank AG, said by phone from London. “When you look at the broad selloff across metals, the key drivers are clearly macro factors.”

There’s a growing fear that problems in China and Turkey will lead to weaker global economic growth, and consequently hurt demand for raw materials. Losses on Wednesday were triggered by a broad retreat in China as the yuan weakened and recent data showed the economy hit a rough patch.

In copper, prices were also hit by speculation that the wage talks at the world’s biggest copper mine will end without a strike. BHP Billiton Ltd. and the union at Escondida agreed to put a new offer to a vote by workers, potentially saving the industry from supply disruptions.

Read: BHP Set to Avoid Strike at Top Copper Mine as Offer Goes to Vote

Metals Poisoned by Turkey Contagion as Copper Nears Bear Market

Adding to the bearish sentiment are more signs that Turkey’s economic woes have spread. Indonesia’s central bank surprised most economists with an interest rate hike on Wednesday as the country moved to contain volatility and curb a slide in the currency.

Commodities have been battered for months by worsening trade tensions between China and the U.S., the world’s two largest economies. The Bloomberg Commodity Index has lost 9.3 percent from a recent peak in May.

For more on commodities: 
  • Threat of Contagion in Emerging Markets Deepens Commodity Risk
  • Gold Runs Risk of Mean Reversion After Such Heavy Losses: Chart
  • Bleak EU Mining Stocks May Get Even Bleaker Amid Copper Rout
  • Bear Markets Beckon as Copper-EM Doom Loop Hits Five-Year High

Base Metals

  • Copper fell 2.3 percent to $5,903 a ton, the lowest since July 2017. Prices have fallen 20 percent since a peak in June.
  • Aluminum retreated 2.1 percent to $2,027 a ton.
  • Zinc lost 3.1 percent to $2,377 a ton, a two-year low.

Sentiment among traders is also turning negative. Money managers have a short position of about 83,000 copper futures and options, near an all-time high, according to data from the U.S. Commodity Futures Trading Commission.

Metals Poisoned by Turkey Contagion as Copper Nears Bear Market

Precious Metals

  • Bullion prices sank 0.9 percent to $1,183 an ounce, the lowest since January 2017.
  • Silver retreated 2.1 percent to $15 an ounce.
  • Platinum dropped 3.7 percent to $771 an ounce, a decade-low.
  • Palladium lost 5.6 percent to $848.94 an ounce.

Mining Stocks
  • Glencore Plc and Anglo American Plc lost about 5 percent today.

While the recent selloff in mining stocks has been steep, prices aren’t that low compared with the depth of crisis from the past few years. The FTSE 350 Mining Index is still more than twice the level from the start of 2015.

Metals Poisoned by Turkey Contagion as Copper Nears Bear Market