Industrial metals are facing significant challenges, with BNY’s EMEA Macro Strategist, Geoff Yu, noting that these materials have struggled to reclaim their early-year highs. The outlook for a rebound appears dim, primarily due to weak import prices across major global economies, including the United States, China, and Germany. The ongoing deflation in China’s producer price index (PPI) further adds to the bearish sentiment in the market.
Yu emphasizes that the demand for industrial metals continues to drag down prices and futures curves, with little indication of imminent improvement. All three major economies report lower import prices on an annualized basis, and Chinese PPI is expected to remain negative for the rest of the year, signaling continued weakness in demand.
Additionally, Indonesia’s recent decision to reduce nickel ore quotas at its largest mine highlights the challenges facing base metals. This move indicates the lengths to which countries will go to maintain advantageous trade terms and illustrates the persistent headwinds impacting commodity markets.
The pressures on metal prices are also anticipated to affect emerging-market currencies that are linked to metals, suggesting a need for tighter financial policies in many regions. Overall, the industrial metals sector is currently caught in a challenging landscape, with various factors contributing to its subdued outlook, but the situation also presents opportunities for strategic adjustments in financial policy and market positioning.