Which metals are set to gain as China eases lockdowns?


In April 2022, China turned the 25 million-person city of Shanghai into a ghost town by imposing widespread lockdowns, especially on factory and manufacturing hubs to combat soaring COVID-19 cases. Two months later, investors can finally see a light at the end of the tunnel, as the Chinese government is finally taking some cautious steps to reopen the economy.
China is one of the biggest consumers of metal commodities. Over the past few months, metals such as copper and aluminium have suffered considerably with Chinese demand continuing to disappoint as lockdowns affected factory activity. Silver has also plunged, due to a tighter monetary policy in the United States, as well as palladium and platinum, when auto manufacturing activity slumped.
With China accounting for more than half of global copper demand, as well as being the largest consumer of refined aluminium in the world, investors are hopeful that with the easing of lockdown rules, these metals may see an upswing soon.
China’s Covid-19 lockdowns have hurt copper
Shanghai reopens after severe economic damage
COVID-19 cases in Shanghai have fallen over 45% in the last few days, leading to the gradual lifting to restrictions on public transport, social and entertainment venues as well as offices and factories.
Shanghai’s economic activity, which was around $600 billion earlier, has already seen a drop of about 50%, due to the lockdowns. The city’s industrial output in April dropped about 61.5% year-on-year, with retail sales down about 48.3% year-on-year.
Looking at whole country, the Caixin Manufacturing PMI fell to more than a two-year low in April, at 46.0, reflecting a contraction in factory activity.
Lifting restrictions will now hugely benefit companies and offices, which no longer have to be on a “whitelist” to operate normally, with restrictions being taken off, leading to factory production significantly ramping up as well.
This is part of a 50-point plan aimed at reviving Shanghai’s economy, which also includes measures such as reducing taxes on certain car sales, as well as implementing subsidies for electric cars. There will also be measures to accelerate building plans, giving the country’s real estate sector a much-needed boost as well.
Which metals are likely to benefit from this move?
As of writing, copper has fallen about 11% since mid-April, when the new wave of Chinese lockdowns were imposed, currently trading at around $4.3 per pound, a far shot from the highs of $5 per pound seen in early March. Aluminium, on the other hand, has fallen about 25% from its record highs earlier in March and is currently trading at about $2905 per tonne.
Both metals rely heavily on China’s industrial and manufacturing hubs and are long overdue for an upswing. Investors are hopeful that the measures taken by the government to support increasing factory production as well as fast-tracking real estate plans could go a long way in helping demand for these base metals.
Silver, which has fallen almost 18% since mid-April, is also likely to see an upturn, as China is a major consumer of silver for industrial purposes, with a share of almost a quarter, mostly going to its consumer electronics and photovoltaic industries. The same applies for gold, which has fallen almost 8% in the same period, as China is a major consumer of gold jewellery, as we previously highlighted here. Thus, with the coming of lockdowns, it had experienced a major fall in in-store gold jewellery retail sales.
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Platinum and palladium, which have seen slumps of 7% and 19% respectively since mid-April are also starting to look up, as Chinese auto manufacturing and sales both slowly improve, with increased production and reduced taxes and other incentives. Both the precious metals are widely used in auto catalysts for traditional petrol or diesel vehicles.
Performance of metals since Shanghai lockdowns

How viable is China’s reopening?
The easing of COVID-19 restrictions in China comes hand-in-hand with the country announcing a number of stimulus measures to support and revive the economy as well.
There are still some questions as to whether the country is actually prepared for the removal of restrictions or whether this would result in a revival of cases. This has largely been the case in the past two years, whenever China attempted to ease lockdowns, only to clamp them hastily down again when cases jumped.
According to Statista, about 87% of China’s population is currently vaccinated with two doses. The main vaccines are CanSino, Sinopharm, ZF2001 and Sinovac. However, these have faced much scepticism regarding quality and effectiveness, as the usage of other global brands such as Pfizer, Astrazeneca and Moderna are relatively low. This has also been flagged as a potential reason for the constant see-sawing in cases as soon as curbs are tentatively lifted.
However, the country has also raised its tolerance of COVID-19 cases, as lockdown fallouts have been taking a major toll and cannot be sustained for too long. As such, investors speculate that COVID-19 is far from over in China, but are still cautiously optimistic, as long as the country does not make any unnecessarily hasty moves.