Metals Update – April 21 2023

Copper prices dip on inflation fears and weak economic sentiment weighs 

Copper prices have taken a hit and are poised for a weekly decline, as fears of a possible American recession weigh on demand for the metal. On Thursday, the three-month copper contract on the London Metal Exchange slipped 0.2%, closing at $8,881.50 per tonne. Meanwhile, the most actively traded May copper contract on the Shanghai Futures Exchange saw a drop to 68,870 yuan per tonne.

This downturn can be attributed to recent economic data from the US, which has revealed a slowdown in retail sales, manufacturing activity, and labor market momentum. Copper, being a reliable indicator of economic performance, has taken a hit as a result. Market concerns were further compounded after John Williams, the President of The Federal Reserve Bank of New York, indicated on Wednesday that the country’s central bank would take steps to lower inflation as the current rate of increase is still worrisome.

While weak economic data has held back the US dollar’s upward momentum, buyers holding foreign currencies may still feel the pinch, as a rising dollar makes copper more expensive. However, despite the expected economic slowdown in the second half of 2023, historically low inventories, supply shortages, and anticipated demand increases as part of the green transition are likely to cause sustained price volatility in the medium term.

It’s worth noting that other metals on the LME and SHFE markets have shown inconsistent movement, making copper a focal point for investors seeking clarity in the current market climate.

Base metals rise on strengthening Chinese economic results and tin rallies on Myanmar government supply intervention 

Demand for base metals in Southeast Asia, China’s economic recovery, and occasional disruptions in supply, particularly in copper and tin, have spurred a rise in base metal prices. According to the London Metal Exchange (LME) Index, this upward trend is expected to continue. China’s Q1 gross domestic product expanded by 2.2% compared to the previous quarter and 4.5% year-on-year, outpacing analysts’ estimates of 4% growth, making it a crucial player in the demand for metals.

The tin market is in motion following a directive from Myanmar’s Central Economic Planning Commission to cease all exploration, mining, processing, and operations related to tin, aimed at safeguarding remaining tin resources. This decision endangers the supply of tin, and although Myanmar may not enforce this strict measure, the country is responsible for producing 40,500 tonnes of tin ore, accounting for approximately 13% of global mine output.

Myanmar is expected to resume production growth in 2023, for the first time since 2017. In response to this news, the price of tin on the London Metal Exchange surged by around 9% to reach $26,940 per tonne, its highest level since February 2023. This will have a significant impact on China, which reportedly imported 62% of its total tin concentrate from Myanmar in 2022.

The price of tin experienced such a dramatic shift on Monday that it hit the 10.5% daily limit on price movements on the Shanghai Futures Exchange. This underscores the volatility of the tin market and the need for investors to stay informed of developments in this area.

Calendar of Events

April 24th, 2023

  • German Business Survey – IFO – Business Expectations Index


April 26th, 2023

  • German Consumer Confidence – GfK – Consumer Confidence Index
  • US Durable Goods Orders

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