China adds shine to base metals

Metals prices have rallied hard after China's government unveiling plans for new infrastructure building, including railways, power lines and electric car charging points.

It is starting to feel “a lot like” 2009-2010 again in the metals market, says Andy Home on Reuters. Few expected a repeat of China’s post-financial crisis “shock and awe” stimulus in 2020, but it is increasingly clear that that is what we are getting. The country’s leadership has defied market expectations of a more socially orientated stimulus programme, instead unveiling plans for new railways, power lines and electric car charging points. Metals prices have reacted by going on a “super-charged rally”. The S&P GSCI Iron Ore index has returned more than 28% so far this year. Seaborne prices for the steel-making ingredient have hit a six-year high. 

Copper has also been breaking new ground, says Amrith Ramkumar in The Wall Street Journal. The metal briefly rose through $3 a pound in the US earlier this month, the first time it had done so in over two years. As with iron ore, robust Chinese demand is the crucial factor: roughly half of global copper production is consumed in the country.  

China’s appetite for industrial metals is likely to remain strong for at least the next 18 months, says Kieran Clancy of Capital Economics. Iron ore imports hit a record high of 112.65 million metric tons in July, a 24% increase on the year before. Perhaps the best bet is copper, whose supply is constrained by problems at Latin American mines. “Doctor Copper” is poised to lead the industrial metals rally higher.

Recommended

Commodities look cheap
Commodities

Commodities look cheap

Gold may be on a bull run, but industrial commodities, including copper, zinc and aluminium, remain cheap.
17 Jan 2020
China’s bulls stampede as recovery gathers strength
China stockmarkets

China’s bulls stampede as recovery gathers strength

China's benchmark CSI 300 stockmarket index has gained 12% so far this year and is up by 32% since 23 March as the country's industrial and consumer r…
21 Sep 2020
Why helium is headed a lot higher
Commodities

Why helium is headed a lot higher

Shortages of key resources never last, but investors can profit with careful timing, writes Dominic Frisby
7 Sep 2020
Gold and the US election: does it matter who’s president?
Gold

Gold and the US election: does it matter who’s president?

With just two months to go until the American presidential election, Dominic Frisby looks at how the result could affect gold’s bull market, and asks:…
2 Sep 2020

Most Popular

How the stamp duty holiday is pushing up house prices
Stamp duty

How the stamp duty holiday is pushing up house prices

Stamp duty is an awful tax and should be replaced by something better. But its temporary removal is driving up house prices, says Merryn Somerset Webb…
25 Sep 2020
Can Rishi Sunak’s winter plan save the UK economy?
UK Economy

Can Rishi Sunak’s winter plan save the UK economy?

With his Winter Economic Plan, chancellor Rishi Sunak is hoping to support the economy through the dark months ahead as restrictions tighten again. Jo…
25 Sep 2020
The electric-car bubble could get an awful lot bigger from here
Renewables

The electric-car bubble could get an awful lot bigger from here

The switch to electric cars is driving a huge investment bubble. But that’s not necessarily a bad thing, says John Stepek. Fortunes will be made and l…
24 Sep 2020