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.
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