Persistent demand from China is supporting nickel and tin prices. In addition, there are now strikes in the producing country of Indonesia. By Julia Groß, Euro am Sonntag
C.hina’s need for raw materials shows no signs of fatigue. The recovery of the Chinese economy seems extremely robust, especially in industry: According to the National Statistics Office, the official purchasing managers’ index for manufacturing rose to 51.5 points in September, higher than economists had forecast. The corresponding barometer from the Caixin media group also continued to show growth at 53 points.
The industrial metals, for which China dominates demand, benefit from this in particular. The copper price alone has risen by around 40 percent since its low at the end of March. The JP Morgan Industrial Metals Index rose by almost 30 percent during this period.
Myanmar delivers less
In the case of tin, China buys around half of the world’s raw material supply. The domestic tin refineries apparently cannot cope with the mass of orders, which mainly come from the semiconductor industry. These factories get their tin mainly from Myanmar, where half of the mines are currently under water due to storms. “The tense situation that has existed for two months should therefore continue in October. Therefore, China could increasingly buy refined tin on the world market again,” says Daniel Briesemann, raw materials analyst at Commerzbank.
Along with Myanmar, Indonesia is one of the largest suppliers of tin, as well as nickel, by the way. But an explosive mood is brewing in the densely populated island state. The government under President Joko Widodo has passed a law in a fast run to facilitate the creation of new jobs in order to avert the looming pandemic-induced recession. The measures undermine environmental protection guidelines and labor rights on a large scale. Paid maternity leave is to be abolished, the daily overtime limit is to be increased to four hours and the compulsory severance payments are to be reduced upon dismissal. Various unions, which represent a total of millions of members, then called for mass strikes. In 1997 a similar legislative proposal was withdrawn after a wave of protests.
Price pressure on the world market
Tin and nickel mining as well as further processing and export would probably also be affected by work stoppages. At the same time, China should put pressure on prices with high demand on the world market. With ETCs from BNP Paribas, investors can bet that the two industrial metals will continue to rise in price. The fee for both tin (ISIN: DE 000 PB8 T1N 2) and nickel (DE 000 PB8 N1C 1) is 0.90 percent per year. Both papers depict the price development without a lever. There is a currency risk as the commodities are quoted in US dollars but the ETCs in euros.