Building|Copper|Energy|Iron Ore|Manufacturing|Steel|Manufacturing
Building|Copper|Energy|Iron Ore|Manufacturing|Steel|Manufacturing

Metals markets face grueling summer as Chinese demand falters

26th May 2023

By: Bloomberg


Font size: - +

Big conferences often crystalize the prevailing sentiment in markets. So it’s probably no coincidence that copper has dived below $8 000 a ton and iron ore is trading south of $100 after metals luminaries gathered in Hong Kong and Singapore to chew over the parlous state of global demand and China’s recovery.

It could be a grueling few months for raw materials that rely on the old economy. China’s building spree that usually takes place in the second quarter has underwhelmed and will soon be replaced by the doldrums of summer. Its manufacturing sector is already there. The world economy is flirting with recession. Rising interest rates and a stronger dollar hover like the proverbial sword over commodities priced in the greenback.

The uncertainty that pervades markets, an anathema to making investments, stems from many sources, be it the war in Ukraine, to the US debt-ceiling standoff and the likelihood of a bitter presidential election next year, to Washington’s fractious relationship with Beijing.

In China, the biggest metals consumer, the modest growth targets set by the central government have failed to ignite demand. The property market remains a major concern, as is the eye-watering level of local government debt.

Beijing could yet ride to the rescue of both metals if it has the appetite to deploy more stimulus. And copper’s relative scarcity and pivotal role in the energy transition put a rosy tinge on any short-term declines. But the clouds gathering over the iron-ore market, at least in its current form, look more ominous.

While Goldman Sachs Group Inc. still sees copper hitting $10 000 a ton by this time next year, it could take five years for Chinese steel demand, the biggest driver of iron ore prices, to notably recover, according to one executive at a Chinese trading firm.

China, by far the world’s biggest steel producer, is likely to cut output again this year in pursuit of its climate goals. Global production has already fallen in 2023, according to the World Steel Association. Chinese output is still running 4.1% ahead of last year’s pace in the first four months, so even after moderating in April “there is clearly scope for further declines,” Capital Economics said in a note.

That’s a direct threat to iron ore consumption. As China’s economy becomes less steel intensive, a lot hinges on how quickly other developing nations can raise their share of demand as they follow its path to urbanization. And unlike copper, the world’s need to decarbonize presents its own challenges for a notoriously dirty industry.

Much of the discussion around ferrous markets in Singapore this week has centered on the expanding role of green steel and carbon-light production methods that require higher grades of iron ore. That’s likely to entrench the premium on better quality material, and suppress prices of the ore more commonly mined and traded on futures exchanges.

Edited by Bloomberg



VEGA Controls SA (Pty) Ltd
VEGA Controls SA (Pty) Ltd

For over 60 years, VEGA has provided industry-leading products for the measurement of level, density, weight and pressure. As the inventor of the...


Leading condition monitoring specialists, WearCheck, help boost machinery lifespan and reduce catastrophic component failure through the scientific...


Latest Multimedia

sponsored by

Photo of Martin Creamer
On-The-Air (24/05/2024)
24th May 2024 By: Martin Creamer
Magazine round up | 24 May 2024
Magazine round up | 24 May 2024
24th May 2024

Option 1 (equivalent of R125 a month):

Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format

Option 2 (equivalent of R375 a month):

All benefits from Option 1
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.

Already a subscriber?

Forgotten your password?







sq:0.247 0.283s - 130pq - 2rq
1: United States
Subscribe Now
2: United States