April 8, 2022

Metals prices are mostly down this week as an extensive COVID lockdown in China has tempered demand, especially for the automotive sector. Tesla’s factory in Shanghai has been closed since March 28, and Volkswagen’s Shanghai factory was shuttered on April 1, according to Automotive News Europe. VW’s and BMW’s factories elsewhere in China have also temporarily ceased production due to government pandemic controls.  Shanghai, which at 25 million people is China’s largest city and an important industrial hub, entered a lockdown in March to repel a rapid rise in COVID cases. The lockdown was supposed to end this week Tuesday; however, on Monday authorities extended the lockdown “indefinitely,” according to Reuters.

Consumers who are concerned about their metals input costs should consider financial swaps or purchasing call options. Such positions are standard for consumer hedging, but they can result in opportunity costs or cash costs if metal prices decline. Please contact AEGIS for specific strategies that fit your operations. (4/8/22)

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