China was recently in the throes of a pandemic-related economic malaise, and that, in effect, could put pressure on industrial metals as demand weakens.
An ING report authored by Ewa Manthey highlighted the macroeconomic outlook for industrial metals like copper and nickel as it related to China’s economic challenges. The second-largest economy has had to deal with a real estate development crisis and resurging COVID-19 cases over the past few years, but a bounce-back was in the making to start 2023. However, that rally has run out of steam.
Until the economy can get back on track, industrial metals will face pressure.
“We believe metals will stay under pressure in the second half of the year as the sluggish recovery in China will likely continue to weigh on demand, with most industrial metals remaining dependent on economic stimulus from the world’s biggest consumer of metals,” the report said. “However, if China introduces stimulus measures, in particular for the property sector, this will boost metals demand and support higher prices.”
“We believe that any improvements in metals prices will depend on the eventual implementation of China’s stimulus measures and actual demand improvement,” the report said further.
Stimulus On The Way
The counterbalance is that the Chinese government isn’t going to stand idly by as the economy sputters. Stimulus measures are already on the way, which could help kickstart the economy back towards an upward trajectory.
If that’s indeed the case, then industrial metals could see strength as demand bounces back. To meet that demand, miners will be responsible for the supply, particularly when it comes to copper and nickel.
Given this notion, depressed industrial metals could provide an entry point for prospective investors. As such, consider the Sprott Junior Copper Miners ETF (COPJ), which seeks to provide investment results that track the total return performance of the Nasdaq Sprott Junior Copper Miners™ Index (NSCOPJ™) that incorporates mid-, small-, and micro-cap companies entrenched in the copper-mining related businesses.
Another fund to consider to get nickel exposure in particular is the Sprott Nickel Miners ETF (NIKL). NIKL offers a unique option to investors, given that it’s the only ETF to provide focused exposure to the nickel miners that supply a critical mineral for the batteries which store clean energy and support the electric vehicle revolution.
Per its fund description, NIKL seeks to provide investment results that track the total return performance of the Nasdaq Sprott Nickel Miners™ Index (NSNIKL™). The index is designed to track the performance of a selection of global securities in the nickel industry, including nickel producers, developers, and explorers.
For more news, information, and analysis, visit the Gold/Silver/Critical Materials Channel.
Article by Ben Hernandez, ETF Trends