Shanghai, the engine of the Chinese economy
$ 570 billion in funding in China raises hopes of copper and iron ore price increases
Copper and iron ore prices have held up surprisingly well as western markets are late in managing the coronavirus pandemic and China has shifted its focus from curbing to rebuilding its economy after more than two months of inactivity.
On Wednesday, BMO Capital Markets held a conference call with PRC Macro, a consulting firm focused on China's political economy, to discuss the country's 2020 GDP growth prospects.
PRC Macro expects Beijing to spend up to $ 570 billion, mostly focused on infrastructure. PRC Macro Says, "To proclaim an economic victory, a growth rate of 5% is the bare minimum that will be acceptable":
The economic plan consists of two parts.
The first, which has almost been implemented, is said to cover the cash flow of companies affected by weak demand.
The second, which has only just started, is to promote growth. Infrastructure spending is key, and much of the support (up to RMB 4 trillion) will come from political banks.
BMO notes that the first stage of resumption of operations in China is to get factories back on track (services would take longer) and that it has "come on well" and notes that even at the center of the Outbreak - Wuhan - (China's Detroit) the automakers have been notified to resume operations, albeit with some restrictions.
Source: Bloomberg
Building a bull
China is responsible for about 70% of the world's iron ore trade and half of the world's copper consumption. China produced 56% of the world's steel last year, and with the rapid expansion of refineries in recent years, the country also produces the majority of the world's copper and other industrial metals.
While panic sales of stocks in the US and elsewhere have driven the markets into a technical bear market, a decline of more than 20%, industrial metals and commodity prices have held up relatively well.
Copper trading in New York should close below $ 2017 a pound ($ 2,50 a tonne) on Wednesday for the first time since May 5.500, but annual losses so far have been barely double-digit.
The Chinese import price of 62% Fe has even risen more than 2% this week and, according to Fastmarkets MB, was $ 90,05 per tonne dry weight on Wednesday, wiping out the pandemic losses of the steel raw material.
Mining News / ISE - March 2020
