After metals prices rallied to record heights following Russia’s invasion of Ukraine, COVID’s resurgence in China brought prices back down to earth.
Concerns that new lockdowns will reduce demand from the world’s largest consumer of commodities have pushed aluminum and tin prices down more than 17% from their recent record highs. Copper, meanwhile, has lost 12% since its March record, while zinc and lead are down 12% and 11% from this year’s highs, respectively.
China accounts for roughly half the world’s copper consumption and is the globe’s top producer of aluminum. Analysts say lockdowns and travel restrictions in major Chinese cities could diminish demand for metals, which may offset supply-chain and inventory issues.
“With their [Chinese] economy being sidelined, this run-up in prices has run into a bit of a wall,” Ed Meir, a consultant focused on metals at brokerage ED&F Man Capital Markets, tells the Wall Street Journal. Meir adds that he believes that while metals prices have peaked in the short term, prices will remain higher than they’ve been historically.
Jim Wiederhold, associate director of commodities and real assets at S&P Dow Jones Indices, recently notes that “the growing likelihood of aggressive interest rate hikes fueled concern of weaker global growth” was also a headwind for metals on top of the COVID-19 restrictions in China. The S&P GSCI Industrial Metals declined 7.6% in April.
Investors looking to invest in industrial metals while prices are down may want to consider the abrdn Bloomberg Industrial Metals Strategy K-1 Free ETF (BCIM), which seeks to provide investment results that closely correspond, before fees and expenses, to the performance of the Bloomberg Industrial Metals Total Return Subindex. The Index consists of four commodities futures contracts concerning aluminum, copper, nickel, and zinc.
When the fund was launched in September, abrdn head of ETFs Steve Dunn said in a news release: “The world is at the early stages of a huge energy transition away from fossil fuels into more sustainable sources. Almost every renewable energy system uses large amounts of industrial metals, including electric vehicles, wind turbines, solar panels, grid-level batteries, and carbon capture systems. That huge, long-term structural demand will drive significant new demand for industrial metals, a trend that this ETF opens investors up to.”
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