UPDATED: 12:00 EST Tuesday
Copper prices continued to slide on Tuesday after China released a set of economic data showing the deepest declines on record for industrial production and fixed asset investment.
Copper trading in New York fell by 3% on Tuesday following a 5% decline Monday to a low of $2.3185 a pound ($5,110 a tonne), the weakest level since early November 2016. The copper price is now down 19.7% from its 2020 high, struck near the end of January.
Economic data released on Monday showed growth in industrial production in China contracted by –13.5% in January and February compared to the same period last year. Expansion in December was still at a healthy 6.9% clip. It was the lowest figure on record and much weaker than the –3% median expected by economists polled by Bloomberg.
Fixed asset investment for January and February dropped 24.5% year on year as the construction sector all but ground to a halt (new construction starts down 45% and sales down 40%) and manufacturing stalled as most migrant workers opt to stay at home after the lunar new year break.
In a note, Capital Economics senior China economist Julian Evans-Pritchard said taken together with similarly weak services sector and employment numbers (five million lost jobs) “suggest that official GDP growth averaged –13% during the first two months of the year”:
This would be unprecedented in China’s modern economic history – GDP growth last contracted in year on year terms in 1976.
Evans-Pritchard adds that the data may be even worse in coming months because the two-month combined numbers released by Beijing mask the fact that in January, disruption to economic activity was still relatively limited.
Copper is particularly vulnerable to broader economic conditions given its widespread use in electrical grids, construction, transportation and industry.
China is responsible for more half the world’s copper consumption and the bulk of global production.