Chinese impulses have helped base metals to a memorable year. With a Biden victory and a vaccine boost coming into play, a further upward trend seems likely.
Chinese stimulus measures help base metals recover
Base metals have seen incredible highs this year, with declines in the first quarter (Q1) overshadowed by a recovery that took us to new long-term highs last month. Chinese demand was a key factor in this surge, as its stimulus-driven recovery helped keep demand high. However, this surge in demand from China may not have come to an end as the Biden presidency is expected to lead to a thaw in US-China relations.
China itself has taken up much of the world’s copper supply, with imports of 5.6 million tonnes since the beginning of the year (Year-to-date (YTD)) at an annual record level despite two months remaining.
Aluminum is the other area where China has strongly dominated the demand landscape, with zinc, nickel and lead being less important to the country. However, as Tesla founder Elon Musk has urged nickel producers to bring more to the market, it is clear that this material will become increasingly important in turning away from gasoline and diesel vehicles.
Meanwhile, the risk sentiment that we have seen in global markets over the past week highlights a growing sense that the world could return to some semblance of normality once we have seen the global distribution of the vaccine. So while the Chinese recovery has been strongly driven by stimuli, there is hope that the economic recovery will boost export demand.
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