Industrial metal prices escape downward pull of financial markets

by David Fleschen

Industrial metal prices have so far escaped the downward pull of the financial markets surprisingly well. Yesterday, too, the losses were kept within limits, while oil prices continued to slide. The LME Industrial Metals Index fell by only 0.2%. The metal prices were supported by the at first glance strong recovery of the US economy in the third quarter. Compared with the second quarter, the annualized increase was 33.1%. However, this means that only two thirds of the previous slump has been made up and the upswing is likely to lose considerable momentum.

Market participants apparently see the demand for metals as less susceptible to the rapidly increasing numbers of new infections with Covid-19 and are placing their hopes first and foremost on China. Yesterday the four-day plenary session of the Communist Party ended in Beijing. Behind closed doors, the new 5-year plan, which will apply from next year, and a long-term plan for China's development until 2035 were discussed. Although details on this will not be announced until spring, when the party congress confirms the program. However, the government has published a communiqué in which it roughly outlines its plans.

According to the communiqué, the government will focus on quality rather than speed in future growth. It sees the need for sustainable growth and wants to strengthen the domestic market and further open up the economy in the coming years. In our opinion, more sustainable growth should be accompanied by the expansion of renewable energies (e.g. wind and solar power) and the electrification of power transmission (electricity grid) and mass transport (electric vehicles). This should result in higher demand for metals such as copper and nickel.

Source: Commerbank Research, Photo: Fotolia


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