KEY POINTS
- Iron ore prices surge following China’s stimulus measures, while copper shows a muted response.
- Market uncertainty persists over whether stimulus will effectively boost steel and copper demand.
- Copper investors remain cautious due to global economic concerns and China’s real estate struggles.
China’s recent stimulus measures have led to a spike in the prices of key metals, with iron ore prices climbing significantly. However, copper’s muted response highlights differing market perceptions regarding the effectiveness of these measures and their impact on the broader economy.
Iron ore price surge driven by sentiment
Iron ore, a critical raw material for steel production, experienced a sharp increase in prices following China’s stimulus announcements. The measures, which included lower interest rates and eased home purchasing terms, have largely been seen as efforts to reignite economic growth in the world’s second-largest economy.
On the Dalian Commodity Exchange, iron ore prices jumped 10.7 percent, finishing at 821.5 yuan per metric ton, marking the highest level since July. According to Mining.com, futures on the Singapore Exchange also surged, reaching $108.24 per ton, up by 15.4 percent from late September.
Chinese retail investors have mainly driven the sentiment-driven rally that caused the rise in iron ore prices. Despite recent fluctuations, the market remains hopeful about the long-term outlook for iron ore, driven by a belief that China’s policies will eventually support stronger demand.
However, the question for market watchers is whether the latest round of stimulus will translate into a sustained increase in steel demand. China’s property market, a key driver of steel consumption, continues to struggle with an oversupply of unsold homes and declining prices, which has cast doubts on the potential for a strong recovery this year.
Infrastructure and manufacturing sectors, buoyed by support for new energy vehicles and energy-efficient appliances, may still help sustain demand for steel, but major improvements are yet to be seen.
Copper’s cautious reaction signals investor concerns
Unlike iron ore, copper has shown a more subdued response to China’s stimulus measures. Copper contracts on the Shanghai exchange rose modestly by 1.8 percent, while London copper remained steady at around $9,979 per ton, showing no significant gains despite China’s efforts to boost its economy.
China accounts for more than half of the global copper demand, giving it a dominant influence over copper prices. However, unlike iron ore, the copper market is also sensitive to developments outside China, such as demand in Western economies.
Many Western investors appear cautious about China’s ability to sustain an economic recovery, especially given the broader concerns about global demand.
While iron ore prices benefited from retail investor enthusiasm, copper has seen less optimism, reflecting skepticism regarding how effective Beijing’s measures will be in reversing the economic downturn. Analysts remain divided over whether the recent stimulus will lead to a meaningful recovery or just manage to stabilize current economic conditions without significant growth.
Outlook remains uncertain
China’s latest stimulus represents the most significant economic intervention by Beijing this year. Still, questions remain about whether these efforts will lead to an actual boost in physical demand for commodities like steel and copper.
Analysts suggest that while steel demand could see a gradual increase, driven mainly by non-property sectors, copper remains more vulnerable to global economic uncertainties.
Overall, iron ore’s recent price surge underscores investor optimism about China’s policy direction, while copper’s restrained response reflects a more cautious outlook, emphasizing the broader uncertainty about the impact of Chinese stimulus measures on its economy.
