China begins to ease COVID-19 restrictions, using the reflation/stimulus trade playbook, expect prices to blast through the roof for Copper, Oil, Wheat and Natural Gas.
China's COVID-19 lockdowns begin to ease as from 1st June 2022, note the chart above (Chart 1), with the blue vertical lines in relation to the copper price. Starting with 27th March as China began trying to contain the Covid variants, with the peak of the lockdowns on the 12th May impacting the copper price at 4.07, a six month low, however copper did not collapse despite China being the biggest consumer of copper in the world, at close to 15 Billion tons consumed per year. This is because supply chain shortages and bottle necks have contributed to copper shortages throughout the world, now with China coming back on line, the price should begin its climb.
The Covid pandemic may have indeed created these raw material bottle necks, but dramatic snapbacks and stimulus into economic activity after lockdowns have caused an upward shock to the price in an already sparse copper market, noted on Chart 2, with the green arrow March 2020 when economies around the world began to pump trillions into the global economy, currencies, more so the U.S. Dollar collapsed and speculation was rife from commodities through to E-Coins and of course share prices. Copper caught the wave.
Chart/s below Chart 2, are (in this order top down) Oil price, Wheat prices and Nat Gas that also caught the reflation wave. All are now parabolic with the Copper price, which of course, points to widespread inflation problems facing global economies.
The other issue is the War in Ukraine and Russia blockade of Ukraine's shipping ports, whilst plundering their exports of wheat. Cereals are up over 50% y-o-y
We may not reach general hyperinflation, but inflation may hyper accelerate within food, energy and commodity markets. To which industries will be priced out in creating new projects.
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My 2021 analysis : “INFLATION AND THE FINITE ENDGAME” PEAK COPPER. COULD THE COPPER SHORTAGE LEAD TO A TECHNOLOGICAL COLLAPSE? (POSTED ON MAY 24, 2021. A.GLASS 2021)
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