China weakness dragging down entire base metals complex - Fitch

Pile of Scrap Copper Rod

FactoryTh/iStock via Getty Images

Analysts at Fitch expect slowing Chinese economic growth to weigh on prices of industrial metals in the near term before anticipating some revival in this year's H2, reported on Friday.

Fitch flags China's COVID lockdowns, weak economic data and devaluation of the yuan - combined with an the European Union's exclusion of base metals such as aluminum and copper from sanctions on Russia - as triggering bearish sentiment on metals since last month.

Copper (HG1:COM) inventories have climbed as lockdowns and logistical constraints have hampered demand, Fitch says, and noted signs of progress in reviving operations at Peru's Las Bambas copper mine, which accounts for 2% of global copper concentrate production.

Aluminum (LMAHDS03:COM) also faces supply-side risks stemming from low and falling inventory levels, particularly in Europe, the firm says.

But Fitch expects Chinese stimulus measures such as the recent cut to the benchmark five-year prime loan rate to help cushion the economy later this year.

Relevant tickers include (NYSEARCA:COPX), (NYSEARCA:CPER), (JJCTF), (JJC), (JJU)

Over the long term, Eurasian Resources Group CEO Benedikt Sobotka believes years of under-investment in mining of metals essential to energy transition, supply shocks and high energy prices will continue to drive commodity prices higher.

A commodity super cycle has now begun and will carry on for the next 30 years, Sobotka says, predicting a 20% rise in copper prices by year-end 2022.

Goldman Sachs analysts said last month that higher copper prices are "an inevitability," forecasting new record highs by mid-year.

Recommended For You

Comments (2)

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.