2021 opens with the biggest health emergency in China in recent years. Coronavirus nCov-2019 is still in its initial spreading phase and estimates of the extent of the number of persons who will be affected, as well as the consequences for the global economy, are not yet reliable in these early days of February.
It is possible to make partial reference to the previous SARS outbreak, but it occurred on a smaller scale and in a period with very different characteristics, just before the start of the so-called super-cycle of commodities. At the moment (February 3rd) aluminium is losing about 6% from the pre-crisis highs (1835 dollars per ton), about half of what copper is losing. These are the same figures seen with SARS, but as we said the two events are not completely overlapping. We can therefore only wait for developments during the next few weeks, considering that in the first phase traders’ concerns will mainly relate to the drop in demand (Chinese growth will probably fall below 5% in the first quarter) due to restrictions on the movement of people and goods. Afterwards, we shall probably see an investment-led recovery, as soon as the health measures taken will have proven their effectiveness in limiting the infection. The Government in Beijing, which has already slackened its monetary policy, may shortly announce further plans to build infrastructures, with the consequent support which would result for metals. In any case, it is best not to anticipate timing and reactions excessively until the outline of the phenomenon will become clearer.