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LAUNCESTON: The China economic stimulus machine is already firing up the prices of key commodities such as iron ore, steel and copper even if there remain some doubts about how rapid, and how effective, its boosting measures will be.

Benchmark spot 62% iron ore for delivery to north China, as assessed by commodity price reporting agency Argus, climbed to $145.85 a tonne on Monday, the highest in a month and 15.2% above the recent low of $126.60 on May 18.

London-traded copper contracts ended at $9,745 a tonne on Monday, the highest since April 29 and some 7.2% above the recent trough of $9,090 on May 12.

The price gains in these international benchmarks have been matched on China’s domestic exchanges, with Dalian iron ore ending at 934 yuan ($140.45) a tonne on Monday, its best close this year and up nearly 20% from the recent low of 779.5 yuan on May 10.

Shanghai-traded steel rebar contracts climbed to 4,774 yuan a tonne on Monday, the most in a month and 7% above the recent low of 4,475 yuan on May 26.

The gains have much to do with a slew of stimulus measures announced by Beijing as it works to stimulate the world’s second-biggest economy, which has stuttered in recent months amid a series of lockdowns in major cities as part of the zero-COVID strategy.

A total of 33 measures were announced on May 31, including moves to boost vehicle and appliance purchases, accelerate infrastructure spending and increase the availability of credit for housing construction.

The steps taken by Beijing have a familiar ring given such measures have been adopted during past stimulus rounds.

However, some analysts have questioned whether they will be enough to lift China’s economic growth to the official 5.5% target for 2022.

There is also the risk of renewed lockdowns given Beijing’s strict zero-COVID policy that resulted in the financial and trade centre of Shanghai spending more than a month in a hard lockdown, from which it has only recently emerged.

Whether Chinese corporate and consumers have the appetite to go out and spend again is a further uncertainty.

However, there are also reasons to expect prices in the metals complex to remain well supported.

China appears to be boosting iron ore imports, with commodity analysts Kpler saying seaborne arrivals were 97.6 million tonnes in May, which is the most since January.

Refinitiv tracked iron ore imports for May of 90.6 million tonnes, which would be the most since December, according to its vessel-tracking and port data.

Iron ore inventories at Chinese ports are also continuing to fall, dropping to 132 million tonnes in the week to June 2, the fifth consecutive weekly decline and the lowest level since September last year.

Steel rebar inventories are also declining, ending at 7.73 million tonnes on June 2, down for an eighth week and about 16% below the 9.22 million tonnes in early March, which was the highest so far in 2022.

If the stimulus measures do result in Chinese steelmakers increasing capacity utilization, then it’s likely that iron ore prices will remain well supported, especially given some concern over supply.

Seaborne exports from Ukraine remain offline in the wake of Russia’s invasion, while India has also announced a ban on exports in order to protect its domestic steel industry.

While these two countries are small exporters compared to the two dominant shippers, Australia and Brazil, the loss of cargoes from them amounts to at least 5 million tonnes a month, which does add some tightness to global seaborne supplies.


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