On Monday, Beijing extended the annual Lunar New Year holiday by two days to Feb. 2. The longer New Year holiday will stretch out a period in which Chinese imports of natural resources typically decline. It could also disrupt industrial activity and prompt Chinese processors to run down existing stockpiles of crude oil and base metals instead of buying new material.
“We need to make sure human lives are saved, and this doesn’t continue, but obviously in the longer term the impact on commodities markets could be substantial,” said Geordie Wilkes, head of research at brokerage Sucden Financial. “Workers could not be able to go back to work. In terms of refiners and smelters in China, that could reduce operating rates.”
China imports more oil than any other nation in the world and consumes around 50% of the world’s copper.
“Talk about trading blind, no one knows how long this will last,” said Colin Fenton, chairman of commodities at Houston investment bank Tudor, Pickering, Holt & Co.