Metals Rout Deepens as China Lockdowns Add to Growth Fears
Comment of the Day

September 01 2022

Commentary by Eoin Treacy

Metals Rout Deepens as China Lockdowns Add to Growth Fears

This article from Bloomberg may be of interest to subscribers. Here is a section:

Investors are “panicking” about the potential impact of  fresh lockdowns and Covid flareups across the country, said Jia Zheng, a trader with Shanghai Dongwu Jiuying Investment
Management Co.

The hawkish drumbeat from central banks, which spurred gains in the dollar, will also continue to put more pressure on commodities. Cleveland Fed President Loretta Mester reiterated the need to raise the US benchmark rate above 4% by early next year and said she doesn’t anticipate cuts in 2023.

Concerns over demand are outweighing continued challenges on the supply side. Chile, which accounts for more than a quarter of the world’s mined copper, reported an 8.6% decline in production in July from a year earlier. In China, Shanghai’s two-month lockdown earlier this year is still rippling through
the economy, with businesses struggling with a sluggish recovery and stalled demand.
 

Eoin Treacy's view

I don’t think most investors fully comprehend how large China’s copper demand is. China’s infrastructure and manufacturing sectors consume more than half of all copper supply. The cessation of residential construction is having a significant knock-on effect for prices.

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