Metal prices are falling rapidly on growing fears of a recession in the world’s major industrial economies, particularly the United States, as central bankers tighten monetary policy to fight inflation. The Bloomberg Commodity Index fell from 134.9 on April 18 to 121 at the end of last week, a correction of around 10%.

Last Friday, the IMF cut its growth outlook for the United States, but said the country would “narrowly” miss a recession. Fears of a weak real estate market in China have clouded the outlook for demand for metals in this market; Aluminum prices on the London Metal Exchange (LME) are down 36% over the past two months. Steel (HRcoils) prices are hovering around $1,120 a ton from $1,540 a ton in early April, while zinc is trading at levels of $3,485 a ton from $4,563 a ton in mid-April.

Bloomberg reported on June 23 that copper, an economic indicator due to its use in all sectors, along with other metals fell this month due to the prospect of weaker demand following a global economic slowdown. Copper has fallen more than 20% from its March high and is trading at a 16-month low. Last Thursday, copper futures on the LME fell 5% to $8,338 a tonne, the lowest since February 2021, while tin fell more than 11% before paring losses, reported writes Bloomberg correspondents.

While prices recovered slightly thereafter, commodity experts believe there is room for a drop and forecast another 20% decline.

The correction in world metal prices has had an impact on the inventories of metal producers in the country.

From its recent high of 6,755.55 on April 8, the Nifty Metals Index fell to 4,490.75 on June 22, recovering slightly to 4,596.6 on June 24. That’s a steep drop of more than 30%.

With aluminum prices falling sharply, analysts cut FY23 EBITDA estimates for aluminum makers by between 3 and 18 percent. They said producers would be hurt not only by lower realizations, but also by the higher cost of coal.

Nomura analysts wrote earlier this month that since the imposition of steel export duties on May 22, hot rolled coil prices have already fallen by around Rs 8,000/tonne, per from their estimate of a maximum drop of 9,800 rupees/tonne. Hot rolled coil prices are around Rs 61,400/ton. “Steel end-user industries, both in domestic and export markets, remain on the sidelines amid weak economic demand and the expectation of further lower steel prices. ‘steel,’ they observed.