China adds shine to base metals

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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Alex is an investment writer who has been contributing to MoneyWeek since 2015. He has been the magazine’s markets editor since 2019.

Alex has a passion for demystifying the often arcane world of finance for a general readership. While financial media tends to focus compulsively on the latest trend, the best opportunities can lie forgotten elsewhere.

He is especially interested in European equities – where his fluent French helps him to cover the continent’s largest bourse – and emerging markets, where his experience living in Beijing, and conversational Chinese, prove useful.

Hailing from Leeds, he studied Philosophy, Politics and Economics at the University of Oxford. He also holds a Master of Public Health from the University of Manchester.