Shanghai metals fall as COVID-19 surge in China unsettles traders

Shanghai metals fall as COVID-19 surge in China unsettles traders
A company logo of Shanghai Futures Exchange is displayed at a booth during LME Week Asia in Hong Kong on Jun 14, 2016. (File Photo: Reuters/Bobby Yip)

Prices of Shanghai metals fell on Tuesday (Jan 3) as the rapid spread of COVID-19 infections and shrinking factory activities in top consumer China heightened traders’ concerns of tepid demand.

The most-traded February copper contract on the Shanghai Futures Exchange was down 0.5 per cent at 65,800 yuan (US$9,554.09) a tonne, as of 6.54am GMT (2.54pm, Singapore time), aluminium dropped 2.4 per cent to 18,240 yuan a tonne and zinc shed 0.9 per cent to 23,500 yuan a tonne.

SHFE nickel was down 0.3 per cent at 228,520 yuan a tonne, tin was flat at 209,170 yuan a tonne and lead fell 0.5 per cent to 15,855 yuan a tonne.

China’s official purchasing managers’ index (PMI) showed factory activity shrank for the third straight month in December and at the sharpest pace in nearly three years as COVID-19 infections swept through production lines across the country.

The private Caixin survey, believed to focus on smaller, export-oriented firms compared with the larger official PMI survey, also showed factory activity shrank at a sharper pace in December after Beijing’s abrupt reversal of anti-virus measures.

The industrial metals markets might not see improving demand and a price rally in the next few months as the headwinds of slow growth will likely dominate the economic landscape for some time.

“The consumption (of copper in China) is currently entering the seasonal consumption off-season,” said Huatai Futures in a report.

Yangshan copper premium fell to US$37.50 a tonne by Dec 30, 2022, down from US$152.50 from just over two months earlier, indicating a drop in demand for imported copper into China.

“But the recent disturbance to the domestic economy by the spread of the epidemic has begun to show signs of decline, and the economy is bottoming out,” it added.

The dropping of China’s stringent “zero-COVID” measures had sparked some hopes for better economic activities in the world’s biggest metals-consuming market.

Three-month copper on the London Metal Exchange (LME) rose 1.3 per cent to US$8,484 a tonne, reversing two sessions of losses.

LME aluminium increased 0.3 per cent to US$2,385 a tonne, tin advanced 2 per cent to US$25,300 a tonne, zinc was up 1.4 per cent at US$3,013 a tonne, while lead declined 0.9 per cent to US$2,272.50 a tonne.

Source: Reuters/at