Industrial metals: The mood on the markets is very volatile

by David Fleschen

The mood on the metal markets is battered. Yesterday, copper temporarily fell below USD 9,400 per ton to its lowest level in almost six weeks. Zinc also marked a 6-week low below USD 3,150 per ton. Most other metals have also lost ground. Concerns have apparently spread among market participants that the tightening of monetary policy by some central banks to fight inflation could stifle the economic recovery and thus also dampen demand for cyclical commodities such as metals. Added to this are the sharply rising Corona infection figures in many places, which are apparently also causing uncertainty. If stricter measures were to be introduced to combat the pandemic, this would probably have a negative impact on the economy.

In the case of copper, moreover, the enormous shortage that prevailed just a few weeks ago seems to be dissipating: The forward curve has flattened significantly and spreads have narrowed sharply, indicating better availability of copper. This is also reflected in the LME stock statistics: freely available copper stocks in LME warehouses have more than quadrupled in the last 4½ weeks to over 62 thousand tonnes. However, this should not hide the fact that they - as well as overall stocks - remain at low levels. This morning, there is a strong countermovement on the metal markets: Copper and zinc are up 2% each, and aluminum is up as much as 3%. According to a Bloomberg report, which refers to data and statements from SMM, there has been a "squeeze" in the Chinese copper market: The price difference between the spot price and the futures contract has jumped up from near zero to currently the equivalent of almost USD 350 per ton since the beginning of the week.

Source: Commerzbank Research, Photo: Fotolia

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