Base metals drop as COVID-19 outbreak, U.S. rate hike weigh
Base metals prices tumbled on Tuesday as rising COVID-19 cases in China and a looming U.S. interest rate hike raised fresh concerns for demand of metals.
Three-month copper on the London Metal Exchange shed 2.5% to $7,954 a tonne by 0434 GMT, and the most-traded October copper contract on the Shanghai Futures Exchange declined 1.9% to 62,170 yuan ($8,988.26) a tonne.
Market participants had hoped China’s COVID-19 outbreaks to ease and metals consumption would eventually improve but the latest outbreak in Shenzhen city – where some major services were halted – hurt confidence.
China has announced out billions yuan worth of stimulus support for various sectors, including infrastructure and electric vehicles, to prop up its COVID-battered economy.
“You can’t be overly bearish medium to longer term for the (metals) complex due to all the support policies … but I think you have to recognize that people are trading a lot shorter term,” said Marex analyst Zenon Ho.
The United States could soon raise another rate hike to curb rising inflation, and U.S. Federal Reserve Chair Jerome Powell on Friday signaled a painful period of slow economic growth ahead.
Higher interest rates would boost the dollar, which makes greenback-priced metals more expensive and less attractive to holders of other currencies, and slow economic growth and metals demand.
Meanwhile, a power crunch has eased in China’s Sichuan province where industrial activities including aluminum, zinc and lithium production were halted earlier this month to preserve electricity for residential consumption.
“That’s bullish for supply but bearish for (metals) price, and also demand stalls because of COVID,” Ho added.
ShFE lead dropped to a more than six-week low of 14,860 yuan a tonne, nickel hit its lowest since July 29 of 162,330 yuan a tonne, aluminum touched a one-week low of 18,345 yuan a tonne and zinc lost 2% to 24,745 yuan a tonne.
On the LME, aluminum declined 2.4% to $2,433 a tonne, tin hit a three-week low of $23,675 a tonne, zinc shed 2.4% to $3,480 a tonne and lead eased 0.2% to $1,982.50 a tonne.
For the top stories in metals and other news, click or ($1 = 6.9168 yuan) (Reporting by Mai Nguyen in Hanoi; Editing by Rashmi Aich and Uttaresh.V)
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