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Middle East

We welcomed the new year with renewed optimism as global markets continued to recover from the wounds inflicted by the pandemic over the past two years. The Omicron variant hit harder and faster than feared, with its global spread and case number spikes putting more pressure on the economic recovery. Being a relatively mild variant, however, those fears surrounding the world’s economic revival have been eased given the fewer lockdowns/travel restrictions and the lesser impact on global trade.

However, global trade is still suffering from the prolonged effects of the pandemic, particularly with regard to logistics and the long-running shipping chaos, as well as other challenges such as the energy crisis and, most importantly, ongoing fears regarding rising inflation.

Recent talk of tightening fiscal policies through raising interest rates to combat the spike in inflation, especially in the USA, pushed the dollar to its highest levels in over two years, impacting commodity prices and base metals on the LME. Having witnessed decade-highs for most metals in recent months, copper, aluminium, zinc and nickel prices have all been caught up in the extreme volatility on the LME. Daily copper price movements of US$ 200-300 per tonne have been putting pressure on scrap merchants and exporters. Prices are poised to drop lower as Chinese traders and manufacturers prepare for the Lunar New Year holidays.

Aside from the spike in new COVID cases across the Middle East, the steady supply of scrap moving out of the region is meeting with strong demand, especially from India and China. It remains difficult to book contracts for European and American destinations amid the ongoing shortage of containers and relatively high freight rates to Western ports. The situation has improved from some ports since the beginning of the year, so perhaps we could witness some easing of the logistics crisis in 2022.