Copper price collapses due to Shanghai confinement due to the spread of COVID-19

Copper fell on Monday on concerns that the spread of COVID-19 infections in top metals consumer China could hit demand, and nickel slumped amid uncertainty over short positions in the market.

Three-month copper on the London Metal Exchange fell 0.4% to $10,222 a tonne by 1100 GMT, its third straight losing session.

“The market is nervous because COVID continues to spread in a city as important as Shanghai,” said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.

China’s financial hub Shanghai has launched a scheduled two-stage lockdown to stem the tide of coronavirus, raising concerns about the world’s second-largest economy’s growth prospects.

Hansen said investors were also cautious after a key measure of the US bond yield curve inverted for the first time since 2006.

“Yield curves in the United States are screaming that we are headed for an economic slowdown, which could lead to lower demand from a global perspective,” he said.

Benchmark LME nickel fell 8% shortly after the open, but losses narrowed to 6.2% for the metal to trade at $33,300 a tonne.

Traders were unsure about the current status of short positions at one of the world’s leading producers, China’s Tsingshan Holding Group. The company’s hedging of short positions was the cause of market chaos and trading halt on March 8.

Nickel on the Shanghai Futures Exchange fell as much as 17% to 208,110 yuan a tonne, after posting a record weekly gain on Friday.

In other metals, LME aluminum was down 0.2% at $3,598, zinc was down 0.2% at $4,059, lead was up 0.2% at $2,354 and tin was up 0.2% at $42,375.