Since November, base metals have soared on expectations that China’s reopening will increase demand for raw materials.

Tin, zinc, and copper have risen more than 20% in three months, helped by the US Federal Reserve signaling a slowing in the pace of interest rate rises and a weakening of the US dollar, which importers use to buy commodities.

Tin has soared about 80% to $32,262 per tonne, the highest level since June, while copper prices have risen by a tenth this month to $9,329 per tonne on improved forecasts for China’s economy following the relaxation of its zero-Covid policy.

Investors have largely dismissed fears about weakening manufacturing activity in Asia’s largest economy in the face of enormous coronavirus outbreaks.

Everyone came in extremely nuanced at the beginning of the year, saying we were going to have a [global] recession, that copper would plummet in the first quarter and then go higher, but we’ve done exactly the reverse,” said Al Munro, a broker at Marex. “Money flow has pushed metals so far in 2023, and that’s about a China reopening story.

Mining executives say the current situation is a dramatic contrast to just a few months ago, when sentiment was low but physical buying from Chinese clients was strong.

It has gone from where we were, where perceptions were poor and on-the-ground was good, to where we are now, where perceptions are better but on-the-ground is questionable,” said Richard Adkerson, CEO of Freeport-McMoRan, one of the world’s major copper miners.

The problem is that all demand indications are quite negative, since global manufacturing purchasing managers’ indices have been plummeting,” he explained. “The demand picture is the inverse of the pricing picture.

Protests roiling copper and tin producers in Peru, production problems in Chile, and Indonesia withholding export license renewals for tin smelters ahead of a proposed tin ingot export ban have all fueled the rally for various base metals.

Tin’s price, which is becoming increasingly strategic due to its use in solar panels and microchips, has also been pushed higher by speculative buying by China, resulting in an increase in inventories.

Despite sluggish demand, China switched from net exports of 9,000 tonnes in 2021 to net imports of 20,000 tonnes last year, according to metals brokerage Amalgamated Metal Trading.

To what extent are traders or governments building up inventories?” asks Daniel Smith, AMT’s chief of research. “If it’s the government, they might sit on it longer,” which would keep prices higher in the long run.

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