Base metals, Commodities, Finance, News

Base metals post worst quarter since 2008

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It was a quarter to forget for base metals as the London Metal Exchange Index (LMEX) tumbled 23 per cent in the three months to June 30.

This equated to the worst quarterly regression since the 2008 global financial crisis as worldwide economic turmoil continued along with ongoing COVID-induced uncertainty in China.

The LMEX was trading at 3879 points on June 30, a far cry from the 5506 points it posted on March 7, soon after Russia invaded Ukraine.

The LMEX tracks the prices of aluminium, copper, lead, nickel, tin and zinc on the LME with the corresponding weights: aluminium (42.8 per cent), copper (31.2 per cent), lead (14.8 per cent), nickel (2 per cent), tin (1 per cent) and zinc (14.8 per cent).

Weightings are derived from global metals production and trade liquidity averaged over the preceding five-year period.

Tin plummeted 38 per cent in the quarter, with aluminium falling around a third and copper approximately 20 per cent.

Lead was nudging $US2500 per tonne (t) at the beginning of the June quarter but has faltered below $US2000/t and was trading at $US1903/t on June 30.

While June saw China ease quarantine rules following sustained lockdowns, base metals demand was muted by the country’s weak property market. In addition, China’s COVID-zero policy poses a continued threat to future freedom and economic stimulus.

The dark cloud that hangs over the US economy has also affected the LMEX. Federal Reserve chair Jerome Powell and other central bankers warned the world is shifting to a regime of higher inflation at the European Central Bank’s annual forum in late June.

While the LMEX is trading at a quarterly low, it is only 9 per cent down from a year before and is trading more than 1000 points above its March 2020 mark, when the pandemic first hit.

The quarterly drop was also heightened by price surges experienced in the wake of Russia’s invasion of Ukraine, which sent markets into a spin.

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