Metals Update – 4 May

The Market

Copper’s positive momentum continued on Thursday, as non-US currency holders saw an increase in the cost of greenback-priced metals, pushing copper prices up. However, China’s weak demand recovery, the world’s largest consumer of the metal, limited the rally.

The London Metal Exchange saw a 1.1% increase to $8,558 per tonne for 3 month copper prices. The US Federal Reserve’s possible pause in its aggressive tightening cycle weakened the dollar against major currencies, but it failed to offset the struggling demand in China, which continued to put pressure on metals prices.

The manufacturing sector, which consumes significant amounts of metals, was impacted by China’s unexpected fall in factory activity in April, due to a fall in orders and a lack of domestic demand.

Analysts at Citi downgraded their copper price forecast for 0-3 months to $8,000 per tonne from $8,500 per tonne, citing weak global demand, high finished goods inventories, and a rise in copper supply.

LME Aluminum was unchanged at $2,320 per tonne, nickel increased by 0.55% to $24,890 per tonne, lead rose by 0.4% to $2,138.50 per tonne, while zinc fell by 0.1% to $2,627.50 per tonne, and tin declined by 2.8% to $26,020 per tonne.

Industry News

Russian gold has suffered from the reluctance of Western buyers, who have been avoiding it due to Moscow’s invasion of Ukraine. This shift has led sellers to seek out new buyers in different locations such as the United Arab Emirates, Hong Kong, and Turkey. The Group of Seven nations, along with the European Union, has prohibited Russian gold imports and companies based in those countries from trading it.

However, smaller players have taken advantage of the situation, filling the void left by major buyers such as JPMorgan and HSBC. Since Russia cannot absorb the $20 billion of gold it mines annually, it has rerouted the commodity to countries without the same restrictions as the West. According to Bloomberg, customs data from ImportGenius shows that merchants in places like the UAE, Hong Kong, and Turkey are still authorized to purchase Russian gold because they are not under any sanctions. For instance, VPower Finance Security, a Hong Kong-based firm that transfers cash and gold for Chinese banks, has emerged as a new buyer, handling over $300 million of Russian gold from March to August 2022.

During the same period, the UAE received more than $500 million of the metal, with most of the merchants located in Dubai, such as Paloma Precious DMCC, which imported $109 million. Meanwhile, Turkey has received about $305 million of Russian gold through its Istanbul airport in the six-month period, as per ImportGenius data.

Foenix Partners, 26 Curtain Road, London, EC2A 3NY