Base metals rise as Chinese investors hedge against weakening renminbi
VANCOUVER (miningweekly.com) – Most base metals traded in positive territory on Monday, buoyed by accelerated buying as Chinese investors use commodities as a hedge against the depreciating Chinese yuan renminbi, analysts at UK-based boutique advisory firm SP Angel stated Monday.
Analyst John Meyer argued in a note to clients that Chinese investors were piling into commodities as the US dollar continued to strengthen and China allowed its currency to depreciate against the US dollar.
The yuan had fallen by nearly 6.5% since April against the greenback.
According to Meyer, US president-elect Donald Trump is likely to lower US corporation taxes, bringing US dollars back into the country and rebuilding American infrastructure.
Markets are also factoring in a Federal Reserve rate rise this year and further rises next year, as the Fed moves to issue new treasuries into the market to cover Trump’s spending aspirations. The US Treasury might also need to print new US dollar bills to pay for Trump’s expenditure plans, a move which could reverse US dollar gains and allow the Fed to maintain lower rates for longer, Meyer stated.
“Middle Eastern and Chinese sovereign wealth funds are reported to have been sellers of US Treasuries this year, leaving us wondering who will buy new issues of US Treasuries going forward. The Fed dare not go too far in terms of raising interest rates, as it may damage US growth when coupled with the strong dollar,” Meyer noted.
The impact of a significantly stronger dollar is hurting US exporters and serves to raise the effective cost of US energy production when compared with overseas energy producers. After all, Trump has pledged to help US coal miners.
Meyer noted that copper prices had regained upward momentum on the back of strong demand for infrastructure in China and weaker supply growth. Iron-ore and coal prices are pulling back but remain at high levels, despite China raising rates and margins on futures trading.
Copper prices rose 2.7% over the Friday closing price of $5 427/t to $5 576/t Monday, while aluminium rose 1.8% to $1 715/t Monday. Nickel was up slightly at $11 165/t, and zinc also traded up at $2 586/t.
Comments
Press Office
Announcements
What's On
Subscribe to improve your user experience...
Option 1 (equivalent of R125 a month):
Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format
Option 2 (equivalent of R375 a month):
All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors
including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.
Already a subscriber?
Forgotten your password?
Receive weekly copy of Creamer Media's Engineering News & Mining Weekly magazine (print copy for those in South Africa and e-magazine for those outside of South Africa)
➕
Recieve daily email newsletters
➕
Access to full search results
➕
Access archive of magazine back copies
➕
Access to Projects in Progress
➕
Access to ONE Research Report of your choice in PDF format
RESEARCH CHANNEL AFRICA
R4500 (equivalent of R375 a month)
SUBSCRIBEAll benefits from Option 1
➕
Access to Creamer Media's Research Channel Africa for ALL Research Reports on various industrial and mining sectors, in PDF format, including on:
Electricity
➕
Water
➕
Energy Transition
➕
Hydrogen
➕
Roads, Rail and Ports
➕
Coal
➕
Gold
➕
Platinum
➕
Battery Metals
➕
etc.
Receive all benefits from Option 1 or Option 2 delivered to numerous people at your company
➕
Multiple User names and Passwords for simultaneous log-ins
➕
Intranet integration access to all in your organisation