Base Metals Weekly Round-Up: Copper Down on Economic Slowdown Fears

Concerns that the COVID-19 spread will slow down the global economy continued to hurt base metals this week, with copper falling more than 11 percent since mid-January. 

The World Health Organization is calling for wider action as COVID-19 has now infected more than 100,000 people around the world.

The stock markets tumbled on Friday (March 6) as uncertainty around the extent of the coronavirus’ impact on the worldwide economy increased.

“I just wonder whether the metals market is able to fully price in the worst impacts in terms of the economy if we are slowing sharply globally and there’s the risk of recession,” independent metals consultant Robin Bhar said.

Copper started the week on an uptrend, increasing from US$5,639 per metric ton on Monday (March 2) to US$5,694 on Wednesday (March 4), but it fell sharply on Friday to trade at US$5,607.

A significant projected decline in Chinese copper demand over Q1 will be hard to make up for later in the year, according to CRU Group’s Vanessa Davidson.

“Our opinion at this point in time is that copper demand in the first quarter of the year is going to decline by about 22 percent on a year-on-year basis, which is a very significant decline,” she said at the Prospectors and Developers Association of Canada (PDAC) convention in Toronto this week.

Zinc remained almost neutral this week, but has lost more than 16 percent since mid-January.

On Monday, the metal was trading for US$2,008.50 per metric ton and, after trading below the US$2,000 mark on Wednesday, the metal was back up at US$2,001 by Thursday (March 5).

Sister metal lead has also been suffering since the start of the year, with prices performing with volatility. That said, this week the metal experienced a sharp fall, kicking off Monday at US$1,904 per metric ton and ending the week below the US$1,900 level at US$1,855 on Thursday.

Nickel has also been hurt by the coronavirus uncertainty, with prices plummeting from US$13,945 per metric ton in mid-January to US$12,695 on Thursday.

However, this week the metal performed in an upward trend as virus cases in Indonesia, the top producing country, increased supply concerns. Prices were trading at US$12,430 on Monday (March 2) and were changing hands for US$12,840 by Friday.

Despite the down sentiment toward base metals, Brian Leni of Junior Stock Review believes that there’s a big opportunity for investors to get ahead.

“If there was a large stimulus package that was announced along with low interest rates, the general consensus is pretty positive, not only for precious metals but base metals too,” he told the Investing News Network at PDAC.

Leni explained that stimulus packages usually meant infrastructure projects and demand for metals (like copper and iron), and the juniors in the base metals sector were going for a bargain.

“Those companies are selling at pennies on the dollar, and generally speaking, the general investor is overlooking them because the case for precious metals is so strong,” he said. “Justified, but there’s opportunity for people who maybe have a more complete look at the market and a more long term outlook.”

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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.