Commodity prices collapse in China as demand fears spook market

Chinese commodity markets collapsed on the first day of trading after the Lunar New Year holidays as investors returned to markets gripped by fear over the impact the coronavirus will have on demand in the world’s biggest consumer of raw materials.

The country’s three major commodity exchanges were hit by a wave of selling as they reopened at 9 a.m. local time as Chinese traders had their first opportunity to catch up with losses inflicted on overseas markets while they had been on holiday. China’s benchmark iron ore contract fell by its daily limit of 8%, while copper, crude and palm oil also sank by the maximum allowed.

Investors have been fleeing raw materials markets around the world from copper in London to palm oil in Kuala Lumpur over fears about the economic fallout from the virus. More than a dozen Chinese provinces have announced an extension of the new year holiday by more than a week in a bid to halt the spread of the virus that has killed hundreds of people and sickened thousands.

Regions accounting for about 90% of copper smelting, 60% of steel production, 65% of oil refining and 40% of coal output have told firms to delay restarting operations until at least February 10.

Fears over the effect that’s going to have on global demand and supply balances have been hammering global prices while Chinese markets have been shut. Brent crude has tumbled about 10% since the start of the new year holidays, copper on the London Metal Exchange has fallen about 7%, soybeans in Chicago around 4% and Malaysian palm oil by 11%. Singapore’s iron ore contract has lost 11%.

© 2020 Bloomberg L.P.