Base metals to trade in a bear market regime – TDS
15.08.2022, 13:37

Base metals to trade in a bear market regime – TDS

Economists at TD Securities argue that the recent recovery in industrial metal prices was overdone in light of the latest macroeconomic data releases from China.

Base metals prices to revert lower

"The Chinese data was weaker-than-expected, with construction and property markets continuing to act as a significant drag, suggesting the recent recovery in industrial metal prices was overdone. Indeed, we are now anticipating Chinese growth of only 2.9% for this year, significantly weaker than the official target of "around 5.5%"."

"In this sense, while our proprietary gauge of commodity demand has mean-reverted sharply higher after the steepest liquidation event in nearly a decade, this recovery in commodity demand signals has likely run out of steam with weaker growth dynamics ultimately weighing on the complex."

"Notwithstanding, our gauge of metals supply risk continues to point to supply risk premia filtering through into base metals, reflecting the uncertainties surrounding the ongoing power curtailments in China and the surging European energy prices. However, we anticipate that the weakness on the demand front will prove to be the more dominant force moving forward. Ultimately, base metals are trading in a bear market regime, and we expect prices to revert lower as this transitory source of supply risk premia abates."

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