Weekly Market Recap (October 4) – What Does China’s Renewed Focus on the Economy Mean for the Metals Market?

What Does China's Renewed Focus on the Economy Mean for the Metals Market?
Published on: Oct 4, 2024

Recently, the Chinese government announced its most robust set of stimulus measures since the pandemic began. Some experts believe this policy shift is of significant political importance, marking the return of economic development as the top priority for the government. These substantial measures have effectively boosted commodity and metal prices, with copper breaking the $10,000 mark, iron ore reclaiming the $100 level, and spot silver hitting a 12-year high.

China, the world’s largest consumer and producer of metals, has seen a sluggish economy over the past few years, acting as a dampener on metal bulls.

However, the metal market is now witnessing a reversal, and optimism is returning. These measures have not only stimulated demand but have also impacted the supply chain of the metals market, further validating investors’ positive expectations for the future. Metals are seen as an effective tool for inflation hedging and asset allocation, attracting significant investor interest.

The surge in industrial metals has even driven substantial gains in global mining stocks. Metals traders attending the LME Week in London noticed that Chinese representatives were among the most optimistic in any gathering.

Michael Taylor, President, CEO, and Director of SLAM Exploration Ltd (TSXV: SXL), elaborate on expectations to receive significant cash and 3 copper-nickel occurrences at Goodwin in an interview with METALS 100 in September 2024. SLAM Exploration holds the Goodwin copper-nickel project and the Mine Road VMS copper zinc silver project in the mineral-rich Bathurst Mining Camp of New Brunswick. Recently, SLAM has discovered multiple gold veins at Medieval.

Several senior metals traders said they hadn’t seen the same level of optimism from Chinese counterparts since before the pandemic. At an event during the LME Week, Amelia Fu, Head of Global Commodities Strategy at Bank of China International, quoted Lenin: “There are decades where nothing happens, and there are weeks where decades happen,” emphasizing a time of significant market transformation and a major turning point.

Nonetheless, many, including some Chinese metals executives, maintain a cautious stance regarding short-term market over-optimism. Visible inventories of copper and aluminum have risen significantly this year, and it might take time for improved sentiment in China to translate into real demand for metals. Despite this, with stimulus measures such as interest rate cuts, reserve requirement reductions, liquidity support for the stock market, and eased home-buying restrictions, there are already some positive signs.

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