LONDON (Reuters) – The outbreak of the deadly coronavirus in the Chinese city of Wuhan has hit industrial metals hard. The London Metal Exchange’s (LME) index of base metal prices has plunged 7% since the first reports of the virus started dominating the headlines just over a week ago.
Copper has been savaged. LME copper has slumped 10% from a Jan. 16 high of $6,343 per tonne to a current $5,715, wiping out all the gains made since the start of December. It is now trading near lows last seen in October.
The slump has been accentuated by the loss of liquidity from Chinese markets, closed for the Lunar New Year holidays. The LME chart picture shows copper “gapping” lower over the weekend, an increasingly rare phenomenon for a globally-traded commodity.
As ever Doctor Copper is paying the price of his popularity with the broader investment universe as the risk-off trade courses through global markets. However, there is also logic in the panic as the copper market collectively reassesses the Chinese industrial recovery story expected in 2020.
The Chinese New Year of the Rat was supposed to herald a rebound in the country’s manufacturing sector, lifting demand across the metallic spectrum. China’s factory activity had been showing encouraging signs of picking up after months of protracted weakness.