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Disappointing China demand hits base metal prices

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The second quarter is traditionally a peak demand season for industrial metals in China but demand this year has remained subdued.

 Jeremy Naylor | Analyst, London | Publication date: Friday 12 May 2023

This is despite the relaxation of the Covid restrictions by the Chinese authorities earlier this year, a policy that was widely expected to see demand pick up in the world’s second largest economy.

IGTV’s Jeremy Naylor looks at copper, aluminium, and zinc.

China demand hits base metals

Now the second quarter (Q2) is traditionally a peak demand period for industrial metals, especially in China. But demand this year has remained subdued despite the fact that China has come back with a vengeance after the Covid lockdown.

At the back end of last year, uneven recovery, we saw recently in the Chinese economic data, sluggish export market. A rise in supplies in the market are weighing on copper prices, but it's not just copper where we've seen some big moves in the market. It's other base metals as well.


Take a look at copper though to begin us off. Yesterday, a spectacular drop in the price of copper and you have to go back some distance before you see a single day's decline like that, crashing through the 200-day moving average, now at the lowest level in 2023, heading for the biggest weekly drop since November.


But it doesn't just stop there with copper. It is other base metals as well. I want to show you what's happening with aluminum yesterday. Aluminum crashing through this line of support at 2251. It's opened this morning with a further decline down at 2209. We're currently now trading at levels not seen there since the 31st of October 2022. So copper and aluminum on the way down.

Nickel and zinc

Let's take a look at nickel as well. Yesterday, some big declines and closing out yesterday's session below this line of support of 22267. There now at levels not seen since the 31st of October.

And it doesn't stop there either because we've got zinc as well, crashing below that line of support that we've seen zinc establishing just a few weeks or so ago at 2584 yesterday, moving lower spectacularly down to where we are pretty much at the moment on the price of zinc levels there not seen since November 2020.

So we've got concerns about the outlook for demand. It's not picking up as many had been expecting in China. And as a result of that, we've seen some new lower lows across many of the base metals.

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