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

Is the oil market heading for a supply glut?
Oil

Is the oil market heading for a supply glut?

Many people assume that the high oil price is here to stay – and could well go higher. But we’ve been here before, says Max King. History suggests tha…
16 May 2022
A family-run investment trust to buy and lock away
Investment trusts

A family-run investment trust to buy and lock away

Menhaden Resource Efficiency made a slow start, but progress is encouraging. Buy before the discount closes, says Max King.
16 May 2022
Get set for another debt binge as real interest rates fall
UK Economy

Get set for another debt binge as real interest rates fall

Despite the fuss about rising interest rates, they’re falling in real terms. That will blow up a wild bubble, says Matthew Lynn.
15 May 2022
Hong Kong’s brain drain
Chinese economy

Hong Kong’s brain drain

A change in the political atmosphere and a harsh zero-Covid regime has seen thousands flee the global financial hub. Does it have a future – or will S…
14 May 2022

Most Popular

Get set for another debt binge as real interest rates fall
UK Economy

Get set for another debt binge as real interest rates fall

Despite the fuss about rising interest rates, they’re falling in real terms. That will blow up a wild bubble, says Matthew Lynn.
15 May 2022
High inflation will fade – here’s why
Inflation

High inflation will fade – here’s why

Many people expect high inflation to persist for a long time. But that might not be true, says Max King. Inflation may fall faster than expected – and…
13 May 2022
What the Ukraine crisis might mean for ESG investing
Advertisement Feature

What the Ukraine crisis might mean for ESG investing

The Ukraine crisis has brought many of the issues around ESG investing into sharper focus. Where does the sector go from here?
3 May 2022