LONDON (Reuters) – If the boredom has well and truly set in after weeks of travel restrictions and social distancing, you could always join metal traders in a game of lockdown lottery.
Metals have priced in the demand shock, or at least the first-stage demand shock, rippling around the world with the spread of COVID-19. The index of the major base metals traded on the London Metal Exchange (LME) bottomed out on March 23 and has since rebounded by 7%.
Now the game is to assess the size of the supply shock to follow as national lockdowns force mines to curtail operations while low prices push some higher-cost operators out of the market altogether.
Nickel is a particularly complex version of the game. This was always going to be a year of shifting supply dynamics after Indonesia brought forward a ban on nickel ore exports, cutting off a key raw material flow for China’s stainless steel sector.
The supply landscape is now changing ever faster as the coronavirus and bombed-out pricing combine to generate a significant series of production hits.