Base Metals May Bounce Back Strongly

There‘s a rise in global inflation, mainly due to the increase in commodity price, in addition to the global property price, rent and salary going up. Among five commodity sectors, precious metals drop, while the others including energy, base metals, grains & oilseeds and livestock increase overall. According the data by Reuters new agency, up to now the energy sector was up by 45.6% from the beginning of this year, followed by base metals, up by 25.1%. Energy’s prices keep rising at a high level, which appears to be difficult to fall. It has been mentioned several times in the previous analysis reports.

Base metals experienced sharp adjustment under the pressure of the Chinese government‘s policy in the second quarter of this year. However, the price of base metals increased strongly in recent months, with a trend towards recovery. Last year witnessed a bullish market of base metals, as the economic recovery fueled by the control of the pandemic in China prompted the skyrocketing prices of base metals. And Biden won the presidential election last year, announcing a large scale infrastructure plan, along with the copper workers’ strike in Chile, resulting in a rise in the prices of base metals including copper.

For instance, the COMEX increased by 147%, from a low level of $1.9825 dollars/pound last March to a high level of $4.8950 dollars/pound this May. From the beginning of this year, the top base metals going up are Li (up by 98.92%), Mo (80.64%), Sn (61.68%), Co (57.94%), Al (40%) and Cu (22.73%).

It is worth noting that the recent prices of base metals show a sigh of rebounding for the continuous recovery of global economy and Biden‘s infrastructure proposal supported by the congress in the end. The coup occurred in the Republic of Guinea that mainly produces aluminum led to a decade-record increase in aluminum prices. In addition, Biden’s $3.5 trillion dollars proposal is deemed as the largest plan after the World War II, and the mass production of electric vehicles boosts the continuous and huge rigid demands of copper, lithium and aluminium.

It is estimated that there still has an optimistic prospect for related futures product, stocks and ETF. On the other hand, affected by the strong prices of energy and base metals, the global inflation is impossible to drop in a short term, thus the central banks in the world are likely to face more pressure from interest rate hikes.