Commodity sellers in Africa, the Middle East and the Americas are becoming increasingly anxious over the situation in China, where days of street protests and COVID outbreaks across the country are weighing down the price of their key exports.
“On top of growing concerns about weaker fuel demand in China due to a surge in COVID-19 cases, political uncertainty, caused by rare protests over the government’s stringent COVID restrictions in Shanghai, prompted selling,” said Hiroyuki Kikukawa, general manager of research at Nissan Securities.
Oil prices on Tuesday fell for a second day over concerns that everything going on in China will further bog down the economy and delay the country’s reopening. Prices in early Asian trading hit their lowest point of the year.
Other key commodities, most of which are sourced from developing countries, saw similar sell-offs on Monday and early Tuesday trading:
- COPPER: The red metal shed 2% in early London trading and almost one percent in New York over concerns that Chinese building will slow amid the ongoing COVID uncertainty. Chile and Zambia are among the world’s largest copper exporters with much of their output going to China. (MINING.COM)
- PALM OIL: Demand for edible cooking oils has cratered this year due to the widespread lockdowns in China that hit the restaurant business especially hard. Traders are selling in anticipation that travel restrictions will remain in place during the all-important upcoming Chinese New Year holiday in January. (BLOOMBERG)
Many developing countries rely heavily on strong commodity prices to generate revenue that’s needed for debt servicing, particularly in countries like Zambia (copper), Angola (oil) and Ecuador (oil) that have large Chinese loan portfolios.
SUGGESTED READING:
- Bloomberg: China’s Covid Curbs to Upend Commodities Demand in Peak Season
- Reuters: Rare China protests roil global commodities markets by Noah Browning, Partima Desai and Michael Hogan
