Metal prices surprisingly robust despite the mood of crisis
by David Fleschen
Despite the high level of risk aversion among market participants, which is reflected in sharply falling equity markets and rising gold prices, we believe that metal prices are holding up surprisingly well. Despite the slight losses, copper still costs more than USD 6,100 per ton. Zinc even increased 1% this morning to $ 2,330 a ton. Only nickel has noticeably lost its feathers and fell by 3.5% on Friday well below $ 14,000 a ton. Apparently, the significantly higher oil prices support metal prices. In our opinion, the robust prices can hardly be explained otherwise. Subdued economic data from China and the USA have been ignored by market participants in recent days. In China, the official purchasing managers' index for the manufacturing sector remained above the 50 mark in December, indicating a certain stabilization of the economy. However, contrary to expectations, the ISM index in the USA has fallen to its lowest level since mid-2009. In our view, it is not sufficient to give metal prices a boost, as announced by US President Trump on January 15, that the “Phase 1 Agreement” will be signed in the trade dispute between the United States and China. The subsequent negotiations on further partial agreements will be much more difficult because they include sensitive issues such as the protection of intellectual property that have so far been left out. We do not think that metal prices will be able to resist the current mood on the markets in the long term.
Source: Commerzbank Research, Photo: Fotolia