China metals in grip of frenzy as investors bet on global rally

China's metal markets are in the grip of a speculative frenzy, with traders and deep-pocketed funds betting on global supply tightness and industrial demand to extend a rally in commodities like copper, nickel and lithium.

- 

Open interest has surged to a record across the six base metals traded in Shanghai, indicating robust sentiment. Heightened geopolitical risk and expectations of a lower-interest-rate environment in China and the US are also driving investors to pour capital into raw materials.

The total turnover of the Shanghai Futures Exchange's six base metals contracts, plus gold and silver futures, reached 37.1 trillion yuan (S$6.8 trillion) in December. The value was up more than 260 per cent from a year earlier; by trading volume, Dec 29 was the single busiest day for copper in more than a decade.

Besides general supply tightness, metals are finding support from monetary easing by central banks. Lower interest rates typically encourage investors to buy nonyielding assets like metals. A weaker US dollar is also a tailwind, with investors piling into the so-called debasement trade.