Monday, January 24

Copper and iron ore slide as growth fears hit metals markets

Iron ore plunged and copper plunged to a four-month low as concerns over China’s steel production, global growth risks and the prospect of reduced stimulus in the United States shook metals markets. .

This week’s slide for iron ore accelerated, and futures fell as much as 12% to the lowest since December in Singapore on expectations that Chinese steel production and consumption will weaken for the rest of the year. in part because authorities control pollution. Prices are more than 40% below an all-time high reached just three months ago.


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Metal markets have also come under pressure from concerns that the Federal Reserve may soon begin to curb the massive stimulus that helped drive prices higher over the past year, as well as risks from the fast-moving delta variant of the coronavirus. spread. Weaker data in the US and China recently added to concerns that the global economic recovery is stalling.

Those concerns pushed copper below $ 9,000 a ton on Thursday, and tin fell as much as 11% as all base metals fell. Mining shares also fell, with BHP Group, Rio Tinto Group, Glencore Plc and Antofagasta Plc falling more than 3%. Oil also doubled, falling below $ 65 a barrel to the lowest level since May.

“The recent slowdown in Chinese macroeconomic figures, the spread of Covid-19 in China and now also an even stronger dollar are all potential risks that in the short term may challenge the long-term bullish outlook for copper,” Ole said. Hansen, director. of the commodities strategy at Saxo Bank A / S.

Minutes released Wednesday showed that most Fed officials agreed that they could begin to slow down the pace of bond purchases later this year given the progress made toward inflation and employment targets, boosting the dollar and holding back. the attractiveness of raw materials.

Copper fell 2.8% to $ 8,786.50 a tonne at 10:16 am on the London Metal Exchange. The material, considered an economic benchmark, reached an all-time high of more than $ 10,700 in May.

Iron and Steel

China has repeatedly urged mills to cut production to cut pollution, with a drop in July output indicating that the measures are beginning to take effect. Some major producers have already arranged to cut supply, while mining giant BHP said this week that the increasing likelihood of sharp cuts in this half is “testing the bullish resolve of futures markets.”

Iron ore fell 12% to $ 131.40 a tonne in Singapore, while futures in Dalian sank as much as 7%.

“Iron ore remains the most China-centric of all commodities, so when economic activity slows, the virus spreads and supply lines are disrupted, iron ore will be on the firing line. “Hansen said.

The fall in iron ore has spread to steel, with prices falling on expectations that Chinese demand will decline. The country’s moves to slow down the housing market and curb rising prices caused home prices to grow at the slowest pace in six months.

“Global steel prices have started to cool down as we expected, and we maintain our view that there will be further price easing through the remainder of 2021 and into 2022 as Chinese demand from the construction industry weakens. “Fitch Solutions said in a statement. Note.

© 2021 Bloomberg

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