Possible change in China’s zero-Covid policy drives base metals prices up; nickel up 8.2%

Three-month futures prices at the 5pm close on Tuesday were as follows, compared with the previous day’s 5pm close:
• Copper: $7,652 per tonne, up by 2.7%
• Aluminium: $2,242.50 per tonne, up by 0.9%
• Nickel: $23,600 per tonne, up by 8.2%
• Zinc: $2,743.50 per tonne, up by 1.7%
• Lead: $1,980.50 per tonne, up by 0.3%
• Tin: $17,970 per tonne, up by 1.9%.

All base metals prices have gone up strongly, with rumors circulating widely that China was considering an alteration to its zero-Covid policy.

There was market chatter on Tuesday morning suggesting that “a Reopening Committee [was] being formed and led by Wang Huning, a standing member [of China’s ruling] Politburo,” according to Zenon Ho of financial services provider Marex’s metals desk.

While this was not confirmed, it was said that the committee planned to review Covid-19-related data from the US, Hong Kong and Singapore to assess the possibility of China reopening at some point next year, Ho added.

The price increases across the base metals complex were in part due to these rumors.

“It’s all down to China,” Fastmarkets analyst Boris Mikanikrezai said. “We have heard rumors of reopening out of China, which pushed risk assets in the country sharply higher [CSI 300 index up by 3.6% on the day]. This produced a tailwind for all base metals, which are highly sensitive to China macro dynamics.”

Nickel’s price was up by 8.2% from Monday’s 5pm-close, continuing its progress upward following rises on Tuesday morning. As well as benefiting from the rumors about China’s zero-Covid policy, nickel was also benefiting from strong electric vehicle sales in China.

Re-opening in China would have significant repercussions for the steel market, and by extension for nickel. “Stainless steel production still accounts for 70% of nickel consumption, so China reopening would have a big effect,” Mikanikrezai said.

Copper was also affected by the rumors. “[The price of] copper rose strongly because Chinese authorities are rumored to be discussing easing the zero-Covid policy,” Fastmarkets analyst Andy Farida said.

“Traders had built short positions in LME copper,” Mikanikrezai said, “and it seems that the rumors out of China forced them to cover their bearish positions, which resulted in a big gain for copper prices [on Tuesday].”