How will the coronavirus outbreak and oil price volatility impact metal prices in 2020 and how can industrial metal buying organizations be prepared for what’s ahead?
This past Friday, the MetalMiner team hosted a pop-up webinar on that very subject, “Managing Metal Price Volatility: How the Coronavirus Will Impact Metal Prices Throughout 2020,” featuring MetalMiner CEO Lisa Reisman, MetalMiner Editor-at-Large Stuart Burns and Vice President of Business Solutions Don Hauser.
The outbreak of the novel coronavirus, COVID-19, has already left a significant humanitarian toll. The World Health Organization (WHO) reported 332,935 cases worldwide as of mid-Monday GMT, with 14,510 deaths, in 190 countries, areas or territories.
While the rate of infections has apparently slowed in China, ushering in a tentative return to work and shopping malls, Italy remains ravaged by the outbreak and cases in the U.S. have quickly escalated over the last week (the U.S. now has the third-most coronavirus cases in the world).
When polled about the issue or challenge they are thinking about most, webinar participants responded with a wide range of points, including price volatility, supply continuity, logistics concerns and cash flow.
Reisman reviewed metals markets at large, referring to MetalMiner’s recent Annual Outlook update. The CRB Commodity Index has plunged and closed last month at 159, Reisman explained, also noting oil prices make up 30% of the index. (As covered by Burns earlier this month, the Saudi-Russian oil spat has led to a flooded market and a plummeting price per barrel.)
While commodities have sustained heavy losses, Reisman noted there is some good news.
“About 80-90% of Chinese workers have come back to work after the coronavirus,” Reisman said. “The country is currently operation between 60-80% … some are forecasting that in six weeks’ time the country will be back to 90% capacity.”
Industrial metals, too, have been on a downward ride, with the PowerShares DB Base Metal Fund index recently dipping below 13.
“I think what we’re going to see is we’ve had a slowdown of demand in China … China’s coming back online, so they’re going to increase their consumption of some of these commodities,” Reisman said.
She added many U.S. manufacturers MetalMiner has talked to are still operating as normal, despite slowdowns or idling in some sectors (automotive, for example).
Other trends to note, at least in the short term, is the U.S. dollar’s strength and its historically inverse relationship to commodities; the U.S. dollar index recently moved up near 103 as commodities went in the other direction.
Circling back to oil, the recent oil price swoon — WTI crude fell below $23/barrel late last week — could end up having more of long-term impact on metals than the coronavirus outbreak.
“We feel the oil black swan is likely the bigger of the two, in terms of coronavirus versus oil,” Reisman said of oil prices, noting the oil price’s decline will have a notable impact on the oil patch, automotive and energy sectors.
As for metals, copper, despite its declines, is “down but not out.” With that said, one can expect further declines as the oil price remains depressed.
However, that won’t last forever.
“We are going to be expecting some sudden demand increases as well once the coronavirus piece is a little bit behind us,” Reisman said.
The MetalMiner team discussed all of the aforementioned and much more during the hourlong pop-up webinar. Interested in listening to the full webinar? Fill out the form at this link to download a recording of the session.