China’s Covid-19 Outbreak Cools Metals Rally

The resurgence of the pandemic in China helped pull metal prices down from highs after Russia invaded Ukraine.

Worries that new economic strikes will erode demand from the world’s largest consumer of the commodity have dragged aluminum and tin down more than 17% from their recent all-time highs. Copper, important for everything from construction to electronics, has lost 8.5% since a record in March, while zinc and lead are down 8.7% and 10% respectively from year-to-date highs. now.

Analysts say the Covid-19 shutdown and travel restrictions in China’s major cities could weaken demand for the metal, helping to offset supply chain and volume constraints. inventories dwindling due to the Russian invasion. While many metals prices remain above their pre-pandemic levels, their retreat from the record has eased some of the immediate concerns about supply shocks further fueling the inflationary spiral.

A sustained rise in raw material prices this year has helped push inflation to a four-decade high, prompting the Federal Reserve to signal a swift rate hike in response and causing a drop in stocks and bonds.

China is key to the global commodity market, with a large manufacturing sector accounting for about half of the world’s copper consumption, and a global leader in aluminum production and use. Many economists have warned that the Chinese government will miss its growth target of around 5.5% this year and investors fear their zero-Covid policy will lead to more stalemate to come. next.

The global metal and mining producers exchange-traded fund iShares MSCI fell 11% in April, its biggest monthly percentage drop in more than two years. According to FactSet, ETF companies get 27% of their revenue from China.

“With them [Chinese] Ed Meir, a metals-focused consultant at brokerage ED&F Man Capital Markets. Mr. Meir believes that metal prices have peaked in the near term but prices will remain higher than before.

Earlier this year, some investors flocked to commodities to protect their portfolios against persistent inflation and geopolitical uncertainty. Russia is also a major metal producer, exporting more than 15% of the world’s aluminum and about 10% of nickel between 2020 and 2021, according to a note by Citi Research.

However, investor dollar flows into general commodities and exchange-traded funds have slowed recently, according to data from Refinitiv Lipper.

“This is the first real test for many investors who may not have a long track record of attribution to commodities. What is your pain threshold? ” said Luke Kawa, asset allocation strategist at UBS Asset Management. “Most of what you’re seeing is that in some cases the pain threshold isn’t very high.”

Mr. Kawa said his company does not want to add any more goods in the near future.

Despite recent declines, prices are still bullish for a range of metals. Crude oil prices have fallen to post-invasion highs but are still up 40% so far this year, while European natural gas prices are four times what they were a year ago, increasing production costs. metal export.

However, other factors seem poised to influence the price. A stronger US dollar has weighed on metals denominated in US currencies, increasing their costs for overseas buyers. The WSJ Dollar Index in April posted its biggest one-month percentage gain in about a decade, lifted by expectations that the Fed will raise interest rates quickly, including a half a percentage point move. potential this week.

“The commodity landscape is complicated right now because you say, ‘Hey, global growth is slowing,’” said Keith Lerner, co-head of investment and chief market strategist at Truist. Advisory Services Inc. “On the other side, you have invasion.”

SHARE YOUR THOUGHTS

Will falling metal demand from China be enough to balance demand pressures from the war in Ukraine? Join the conversation below.

Write to Hardika Singh at hardika.singh@wsj.com

Copyright © 2022 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8

https://www.wsj.com/articles/chinas-covid-19-outbreak-cools-metals-rally-11651534641?mod=rss_markets_main China’s Covid-19 Outbreak Cools Metals Rally

Edmund DeMarche

USTimesPost.com is an automatic aggregator of the all world’s media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials, please contact us by email – admin@ustimespost.com. The content will be deleted within 24 hours.

Related Articles

Back to top button