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The problem is moving from Shanghai further into China

China's virus restrictions are spreading from Shanghai to other parts of the country, limiting metal supply chains and reducing demand.

Earlier we reported that there is a severe lockdown in Shanghai causing problems in factories and transportation. However, it now looks like the factory closures and traffic jams around Shanghai are easing slightly. What is not easing is the situation in other parts of China and, on the contrary, the problem seems to be shifting slightly there.

Read also: Russian oil industry slows down

Tighter controls have been introduced in the cities of Suzhou and Zhengzhou, the capital of the central province of Henan. China has so far decided to stick with its Covid Zero policy, despite mounting evidence that it is threatening economic growth.

A large number of commodity processing companies are halting production or imposing various production restrictions. The country’s largest Tin producer, Yunnan Tin Co. has halted production at its main mining unit. Many copper bar producers and other upstream firms are also reporting problems.

China flag next to rolls of steel

China’s central bank helps with interest rates

We reported that China’s central bank on Friday refrained from cutting its main policy rate while gross domestic product and industrial production data beat estimates. However, these numbers do not fully factor in the extent of the lock-ups as they came a little later. Metal prices reacted mixed to the cut in the key interest rate.

Copper futures on the Shanghai Futures Exchange closed 0.3% lower. Aluminum fell 0.1%, while zinc rose 0.3% to its highest since 2007 and nickel climbed 1.2%.

So it remains to be seen if China can use cheaper money to offset this slowdown caused by the Covid-19 pandemic and the concomitant slowdown in industrial production.

Bruno is an Investment enthusiast with several years of experience in the industry. He enjoys following the latest news and technology trends...

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