Coils, coiled copper wires, lie on pallets in the wire plant (coiler) at Aurubis AG. After a casting and rolling process, hot copper wire is wound through the coiler into a coil weighing up to five tons and measuring around twelve kilometers in length.
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Industrial metals have been volatile this week as mounting inflation fears put further pressure on global bond markets.
Copper futures for August delivery dropped 1.3% on the London Metals Exchange on Tuesday, before rebounding 0.5% on Wednesday to $13,477 per ton. The metal — used in various goods including electrical wiring, machinery and plumbing — is widely seen as a bellwether for the global economy.
How copper futures for August delivery have fared over the past month.
Aluminum, nickel, tin and zinc have been similarly oscillated between gains and losses.
The moves came amid broader volatile trade in global bond and equity markets. Global stocks have been volatile as investors assessed corporate earnings and U.S. Treasury yields, climbing to multi-decade highs.
Analysts told CNBC the outlook for many industrial metals was being clouded as complications unfolded on both the supply and the demand sides.
Zinc
In a note last week, strategists at Macquarie said potential risks for zinc were weighted to demand pressures, given that around 55% of end-use demand is in construction and therefore vulnerable to any economic downturn.
“On the supply side, higher diesel, acid and explosive costs are weighing on margins, but this should not be an issue at current metal prices,” they said.
“Energy prices in Europe are a key risk for European zinc smelters, although power prices are yet to show much of a reaction to the situation in the Middle East.”
Aluminum
Similar uncertainty has also emerged in aluminum, in which “structurally tight supply is set against weak end-demand” in Europe and North America, according to Shashank Sriram, senior metals analyst at Wood Mackenzie.
Aluminum is an essential material across electronics, transport, and construction, as well as other industries such as solar panels and packaging. Around 9% of global aluminum supply comes from the Gulf, and most firms there have been unable to export the metal beyond the region since Iran effectively closed the Strait of Hormuz.
“As the conflict persists, supply risks are becoming more entrenched,” Sriram told CNBC.
“Even in a scenario where the Strait reopens, the supply shock is not quickly reversible – beyond shipping dislocations and raw material disruptions, the restart of smelters following both controlled shutdowns and uncontrolled damage will be gradual, which means recovery will be phased rather than immediate.”
As such, Wood Mackenzie sees “insufficient demand-side momentum to sustain a move towards $4,000 per ton” in the near future.
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Source: www.cnbc.com
