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Middle East

The final month of the year has arrived amid fears surrounding a new COVID variant that is already causing panic and uncertainty across markets and borders. The heavily-mutated Omicron strain first emerged in Africa and then began to spread across Europe - a reminder that we are still battling the pandemic along with all the other challenges facing markets and international trade.

By early December, the global markets had absorbed the psychological fears of the new strain, with a recovery for, notably, base metals and oil. The oil price has gradually recovered after suffering a 12% drop on November 26 while copper has returned to around US$ 9600 per tonne after dropping more than US$ 500.

October proved to be a testing month as markets and LME base metal prices tumbled after earlier historic gains. Traders had to face a range of challenges - from the power crisis to the slowdown in demand from China’s industrial sector, as well as its property crash. This was followed, however, by a demand recovery amid positive manufacturing data and improved sentiment in China. Copper and aluminium had picked up some of their momentum of previous months until the new COVID variant hit market confidence. Demand and ongoing supply tightness could see copper reaching high levels again in the near future.

Supply chain disruption is still a major concern for the global economy and there is plenty of pressure on contracts and deliveries to some destinations from the Middle East. There has been an improvement in this region’s scrap metal volumes but problems have been encountered in finding homes for some of the material as demand in India and the Far East is slowing, especially for aluminium, while it is difficult to ship to European and American destinations owing to the disruption to logistics.

In the Gulf Region, sentiment had been positive given: the continuous increase in oil prices which encouraged more government spending on infrastructure and mega projects, especially in Saudi Arabia and the UAE; and the busy tourist season, with a number of major events including Expo 2020 in the UAE. However, the new COVID strain now poses the threat of new lockdown measures across borders and could be a major setback for those running projects and for recovery plans already put in place.