Copper’s Worst Month Since 2015 Shows Why China Is Everything

(Bloomberg) -- Copper posted its ugliest monthly decline since 2015, marking a spectacular sell-off as investors priced in fears about the economic fallout from China’s coronavirus.

The metal fell 9.8% in January and stretched for a record 13-day losing streak Friday. Commodities across the board are in the red. Oil futures have slumped 16% this month while crop markets, like soybeans, have also tumbled.

Investors are fleeing raw materials as China’s key industrial provinces extend Lunar New Year holidays, raising concerns of a sharp drop in demand. Units of State Grid Corp., China’s largest operator of electric networks, postponed some tenders for construction projects as the country combats the coronavirus. The Asian nation accounts for half of global base metals demand, compared with 19% during the SARS pandemic, based on Bloomberg Intelligence estimates.

China’s trade council said it would provide force majeure certificates to companies that are unable to meet international commitments.

“Overall bias for most metals remains weak until there emerges some clarity that the virus outbreak in China can be contained,” Priyanka Jhaveri, an analyst at Kotak Commodity Services, said in a note.

More than a dozen Chinese provinces, including Hebei and Yunnan, announced an extension of the current Lunar New Year holiday by more than a week, meaning at least two-thirds of China’s economy will stay shut next week.

The regions account for about 90% of copper smelting, 60% of steel production, 65% of oil refining and 40% of coal output.

Hubei province, where the virus-hit Wuhan city is located and part of China’s industrial heartland, has said the holiday will last until at least Feb. 14.

On Friday, copper dipped 0.4% to settle at $5,567 a ton in London, taking its decline this week to 6.1%.

Copper’s Worst Month Since 2015 Shows Why China Is Everything

©2020 Bloomberg L.P.

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