Base metals sank as fresh fears over property turmoil in China gripped markets, with a major developer at risk of a default and the slump casting a pall over one of the industry’s most consequential annual gatherings.
(Bloomberg) — Base metals sank as fresh fears over property turmoil in China gripped markets, with a major developer at risk of a default and the slump casting a pall over one of the industry’s most consequential annual gatherings.
Country Garden Holdings Co. warned that it might not be able to meet repayments on offshore debt and has hired advisers, a strong indication that the company faces a restructuring. All six major base metals fell on the London Metal Exchange, with zinc losing as much as 2.6%.
China is the world’s most important market for base metals, and the announcement from the indebted builder has reignited investor fears about possible market contagion and an even deeper slump in construction activity. Country Garden has four times the number of projects than China Evergrande Group, whose 2021 debt failure also spooked commodities.
The drop in prices — as well as the outlook for China’s vast economy, including its real-estate industry — will likely feature as a key topic for producers and traders as they gather in London at this week’s high-profile LME Week.
While metals had held up relatively well this year even amid China’s economic slowdown and property crisis, the LMEX Index — a hold-all gauge — hit the lowest level since November last week. Strong growth in sectors like new-energy technology has helped to offset the slump in real-estate activity.
Three-month zinc was 1.8% lower at $2,468 a ton on the LME at 4:31 p.m. in Shanghai, as copper, lead, nickel, aluminum, and tin all retreated.
The losses persisted even as Bloomberg News reported China may unleash another round of stimulus to help the economy. Policymakers are weighing the issuance of at least 1 trillion yuan ($137 billion) of extra sovereign debt for spending on infrastructure, according to people familiar with the matter.
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