Industrial metals stabilize after coronavirus shock
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LONDON — Copper prices edged higher on Wednesday after plunging almost 10% in six days as an outbreak of coronavirus in China threatens to curtail economic activity and metals demand.
Other base metals, oil prices and global stock markets also largely stabilized even as the death toll from the virus rose to 132, airlines stopped flights to China and the infection spread to other countries.
But underlining the ongoing risk to metals consumption, a Reuters poll showed growth in China’s sprawling manufacturing sector likely stalled in January, while Toyota said it would keep its production plants in China closed through Feb. 9.
China is by far the largest consumer of metals.
“It’s still too early to call the bottom,” said Capital Economics analyst Kieran Clancy. “You really need to see signs that the virus is being brought under control for prices to recover … there’s a clear downside risk.”
Benchmark copper on the London Metal Exchange (LME) was up 0.4% at $5,725 a tonne at 1045 GMT, down from around $6,250 at the start of last week.
Prices of the metal used in power and construction had been rising as prospects for economic growth improved, but are now nearing a 28-month low of $5,518 a tonne reached last August.
YIELD CURVE: Fears of economic damage from coronavirus are also reflected in the U.S. Treasury yield curve, where three-month yields briefly rose on Tuesday above 10-year borrowing costs — the so-called curve inversion that is seen as a fairly reliable signal of oncoming recession.
DOLLAR: The dollar strengthened for a fifth day as investors looked for safe places to park money, putting pressure on metals priced in the greenback by making them more expensive for buyers with other currencies.
FED: The U.S. Federal Reserve will conclude its latest policy meeting on Wednesday with interest rates almost certain to remain on hold.
LEAD SPREAD: The premium of cash lead over the three month contract on the LME fell to $15.50 from a 5-1/2 month high of $26.50 on Monday, suggesting that tightness in nearby supply was easing.
OTHER METALS: Benchmark LME lead was down 0.6% at $1,879 a tonne, aluminum was 0.1% lower at $1,750, zinc rose 0.6% to $2,242.50, nickel gained 1.2% to $12,700 and tin was up 0.1% at $16,345.
(Reporting by Peter Hobson; Additional reporting by Mai Nguyen in HANOI; Editing by Louise Heavens)
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