The situation in Russia and Ukraine is of great concern to the markets. Russian President Vladimir Putin signed a decree on the 3rd to take retaliatory special economic measures against unfriendly acts of some countries and international organisations. Ukrainian President Zelensky was quoted by the UTA on 3 March as saying that Ukraine can only seek neutral status if the people of Ukraine pass a referendum on the premise of international guarantees and Russia’s endorsement of the guarantees.
EU plans to replace two-thirds of gas imports from Russia within the year.
The European Commission will present a plan for the replacement of Russian gas later this month, said EU Commissioner for Energy Affairs Simson on May 3, local time.
Speaking at a plenary session of the European Parliament on the same day, Simson said the EU plans to replace two-thirds of its gas imports from Russia by the end of this year.
She said that the EU, for its part, had approached all major suppliers to find alternative sources of gas. The plan also includes the use of more renewable energy sources to replace gas, as well as a range of energy efficiency measures.
EU officials say they are working on a sixth round of sanctions against Russia
On 3 May local time, EU foreign affairs and policy representative Borrelli said that the EU is working on a sixth round of sanctions against Russia, which will target the banking, media and oil sectors.
Borelli said on social media the same day that the relevant measures would be submitted to EU member states for approval and adoption.
According to EU rules, any sanctions proposal needs the unanimous consent of 27 member states to take effect, and Hungary, Slovakia and other countries have previously made it clear that they oppose the implementation of further sanctions against Russia in the energy sector.
LME non-ferrous metals under pressure as macro environment overlaps with weaker demand
LME copper and LME aluminium both fell to three-month lows yesterday, with LME three-month copper down 2.50% to US$9,525.50/t, touching an intraday low of US$9,505/t since 31 January; LME three-month aluminium fell 2.74% to US$2,969/t, touching an intraday low of US$2,967/t since 2 February. Market participants said the overall weakness in the non-ferrous metals sector was due to the market’s expected reaction to the Federal Reserve’s imminent acceleration of tightening and the impact of weakening global demand.
“The US quarterly and March core PCE price indices released the day after the holiday remained at strong annual rates of growth, cementing expectations of a Fed rate hike and tapering to fight inflation beyond expectations. According to the CME ‘Fed Watch’ tool, the probability of the Fed raising rates by 50 basis points in May is 97.1%. The Fed may take a stronger tightening policy in response to high inflation, and the market is reacting in advance to that expectation. Macro suppression continues to strengthen, holding non-ferrous metals in check, with copper prices under pressure especially.” Chen Xiaobo, an industrial products analyst at the Huishang Futures Institute, said.
Centaline Futures non-ferrous metals researcher Liu Peiyang said, the Federal Reserve is about to announce the May interest rate resolution this week, the market is expected to announce a 50 basis point rate hike almost no suspense, but the market is very concerned about the Fed’s upcoming tapering program. The Fed tightened monetary policy short-term push up the dollar sharply stronger, thus forming a suppression of non-ferrous metal prices.
In addition to the impact of the macro environment, Chen Xiaobo believes that the continued weakness of non-ferrous metals is also affected by weakening global demand. He said, by the Russian-Ukrainian conflict, the new crown epidemic and other factors, the global major economies demand growth slowed down, China, the United States, the eurozone manufacturing PMI in April fell to varying degrees, the level of manufacturing boom fell. New data show that China’s official manufacturing PMI index for April was 47.4%, down 2.1 percentage points from the previous month, hitting a low level since March 2020.
“From the sub-index and industry PMI changes, the impact of short-term factors such as the multi-point distribution of domestic epidemics and international geopolitical conflicts continues, with a greater impact on logistics and employment, continued high prices of raw materials, increased triple pressure on the manufacturing industry, and a significant drop in growth in the middle and upper reaches of the industry.” Liu Peiyang said.
At present, the outbreak of the Russian-Ukrainian conflict has lasted for more than two months, the disturbing factors for the non-ferrous metals market are still in place, in Liu Peiyang’s view, the supply-side tension is expected to have been basically digested by the market, the overall LME metal inventory tension has not deteriorated further. Relatively speaking, the demand side has a greater impact on non-ferrous metal prices, especially as the market’s concerns about a weakening economy are mainly reflected from the demand side. In the current context of high global inflation, economic growth is facing downward pressure, from the perspective of economic cycle rotation, the global economy is expected to gradually enter the stagflation cycle from the overheating cycle, and there are even many people expecting that the US economy may enter recession early, so the overall market overheating sentiment is in a gradual cooling process.
“The Russian-Ukrainian conflict and the new crown epidemic are still impacting both the supply and demand sides of non-ferrous metals, with the supply side mainly affected by overseas energy issues triggered by concerns about shrinking supply, and the demand side mainly due to logistics and transport disruptions and shutdowns. Overall it is difficult to say which side will have a greater impact, but it is important to break it down: overseas, the current supply issues are more pressing (especially for zinc), demand has fallen but is still strong, and low inventories are still supportive of prices. In terms of domestic, the demand side of the problem may be more due to the unexpected development of the epidemic and the impact of the dynamic clearing of the epidemic prevention policy, overlaid with the recent devaluation of the RMB. However, in the context of the government’s steady growth, demand recovery is still expected to be strong, and the current uncertainty mainly comes from the epidemic situation and the duration of the anti-epidemic policy.” Chen Xiaobo said.
For the market, Liu Peiyang believes that a core concern of the market is whether the current round of non-ferrous metals rising highs since the outbreak of the new crown epidemic in 2020 has been determined. “From the macro market point of view, the Federal Reserve announced an interest rate hike officially marked a major change in its monetary policy, in such a context, global economic growth will face difficulties, and the outbreak of the Russia-Ukraine conflict has increased the degree of difficulty. Therefore, the supply and demand pattern of the non-ferrous metals market will also change due to the impact of the macro market, the core of the market concern will also gradually shift from the supply side to the demand side. If the global economy can maintain the resilience, non-ferrous metal prices may run at a high level for a longer period of time.” He said.
Chen Xiaobo is of the view that the current market focus on the Fed’s May interest rate resolution and monetary policy press conference on subsequent rate hikes, tapering pathway guidance, the market has traded most of the expectations, in the case of little difference with expectations, the macro aspects of the pressure or ease. The Russian-Ukrainian conflict has not seen a signal to ease in the short term, overseas energy prices are easy to rise but difficult to fall in the pattern of tight supply and low inventory situation is difficult to improve in the short term.
“In the short term, macro pressure is still strong, after the holiday non-ferrous metals or performance for first down and then up. Copper financial attributes are obvious, or greater volatility; zinc mainly trading low inventory support under overseas supply concerns and demand recovery expectations, if the epidemic situation improves, the space above still exists; aluminum mainly trading domestic demand recovery expectations, because the domestic electrolytic aluminum production capacity speed up, supply pressure is not much, the elasticity above or weaker than copper and zinc; nickel current logic lies in the supply of tight and low inventory support, short-term bias strong view, but in the medium and long term in Supply turned loose under the expectations, or face greater risk of retreat.” Chen Xiaobo said.
Post time: May-05-2022