ASX copper shares are having a mixed day as the slumping copper price offsets a resurgence in risk appetite.
While the S&P/ASX 200 Index (ASX: XJO) is rallying 1.9% during early afternoon trade with many of the big miners leading the charge. Although, those exposed to the red metal aren't necessarily joining the party.
Little wonder as copper prices fell to new 16-month lows this morning. The commodity is fetching US$3.70 a pound.
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Recession worries dent ASX copper shares
Sentiment towards the metal was already tarnished last week when it slipped to US$3.78 a pound. That was a one-day loss of 4% and its lowest level since February 2021.
Worries about a global recession triggered the sell-off in Dr Copper – so named as copper is seen as a bellwether for the metals market.
Central bankers in the developed economies are hiking interest rates to curtail rampant inflation. Indeed, we are seeing this in the US, Europe, and Australia.
Their hawkish stance is increasing the risk that they may hike rates too far and fast. Any miscalculation could cause their respective economies to contract.
ASX copper shares underperforming today
A recession will ultimately mean lower demand and prices for copper. That's certainly bad news for ASX copper shares.
The OZ Minerals Limited (ASX: OZL) share price is one that's taking a beating with a 2.14% drop to $18.78, while the Aeris Resources Ltd (ASX: AIS) share price is flat as the broader market is rising.
The OZ Minerals share price is also copping a beating because of its production downgrade released today.
Downgrades hit the OZ Minerals share price
The miner said group copper production for 2022 would range between 120,000 and 135,000 tonnes. This is below its previous guidance of 127,000 to 149,000 tonnes.
Adding insult to injury, costs are also rising. The expected C1 cash costs are up to US$1.05 to US$1.20 a pound. This compares with the original estimate of US85 cents to US95 cents a pound.
Bad weather and employee absenteeism due to COVID-19 are to blame, the company says. OZ Minerals' Carrapateena mine is also being impacted by equipment failure and ongoing resourcing issues.
A few bright spots
But it isn't all bad news for ASX copper miners. The Sandfire Resources Ltd (ASX: SFR) share price is surging 3.2% to $4.675.
The company's shares are still down almost 30% since the start of 2021 but shareholders will be taking the wins wherever they can find them.
Also, the strong rebound in equities today is driven by the belief that too much recession risk has been priced into markets.
If this is true, ASX copper shares could stage a big comeback later this year.
