Coronavirus : why metal prices diverge

In La Tribune 21/03/2020

First there is the fall of the lost paradises: palladium and rhodium. As a result of the dieselgate and the anti-pollution standards that followed, petrol engines were preferred to diesel engines, leading to an increase in the consumption of palladium and rhodium in automotive catalysis. The movement has not escaped from the interest or investors, prices of both metals have soared to the point that we described these two markets, a few weeks ago on this blog, as chocolate-wrapped grenades.

Shortly afterwards, the grenades exploded. Palladium prices fell by almost 50%, while rhodium prices dropped from over $14,000 to around $3,000 today. The latter metal is, as it does every ten years, repeating the same speculative bubble: spectacular rise and rapid fall in 1990, 2000, 2010 and 2020.

Limited fall for non-ferrous metals

Unsurprisingly, the fall is general but limited in the base metals: copper, aluminium, nickel, zinc. The collapse of prices is significant in energy with the historic fall in natural gas prices and the oil war between Riyadh and Moscow. It is also important for some commodities: sugar, cocoa, cotton…

But other compartments are resisting, notably the steel industry. There are two reasons for the V-shaped curve in the price of iron ore, from $95 before the Chinese New Year it was logically down to $80 at CNL, and $90 at present. On the one hand, Chinese steel mills, World leaders, are located far from Wuhan and have remained dynamic despite the crisis; on the other hand, Chinese iron ore production collapsed at CNL without having really recovered since then. As a result, more than in the past, Australian and Brazilian iron imports have met demand and overseas iron prices are firm. Similarly, steel prices have recently started to move in a V-shaped curve. Other steel-related materials are also seeing their prices move up through the V-link and up again, such as sea freight and molybdenum.

This may be due to the confinement, but some agri also have atypical, upwardly oriented prices: tea, coffee to a certain extent, and the star of the moment, whose crisis has only strengthened its dynamism and storage, rice.

Rebound in gold

As for gold, after having been on a steady upward trend, it passed the $1,700 threshold and lost only 10% before rebounding. A positive performance compared to the stock markets.
As expected (see this video), the latter will illustrate the temporality of the crisis. In China, it will probably be resolved at the end of the first quarter, and we should see the same outcome in Europe, but at the end of the second quarter.

In the meantime, I hope that we will have thanked, in consideration but also in budgets, the admirable dedication of the health world: nurses, medical students, civilian and military doctors and the health reserve.