Copper and iron ore rebound as China pledges to support economy
Industrial metals, from copper to iron ore, recouped some of Monday’s losses after China pledged more support to help revive an economy that has been jeopardized by a growing virus outbreak.
The country’s central bank has pledged to increase its monetary support to the real economy, especially for industries and small businesses hit hard by the pandemic, it said in a statement on Tuesday. This follows the People’s Bank of China’s decision on Monday to reduce the amount of money banks must have in reserve for their foreign currency holdings, an attempt to help limit the decline of the yuan.
Strict lockdowns are wreaking havoc on consumer spending and snarling supply chains in the world’s second-largest economy, putting its gross domestic product growth target of around 5.5% this year under growing threat. Chinese authorities have already taken some steps to stem the economic damage, including accelerating government borrowing and spending to boost infrastructure investment.
“Politics may be the salvation for Chinese demand for iron ore and base metals this year,” Vivek Dhar, commodities analyst at Commonwealth Bank of Australia, wrote in a note. “Policymakers are hoping for a soft landing, helping to stabilize demand for commodities in the property construction sector,” while infrastructure investment in the country is also expected to increase significantly this year, he said. added.
On the virus front, outbreaks have intensified this week with most of Beijing being tested, stoking fears of an unprecedented lockdown in the capital. The city of Baotou in the northern province of Inner Mongolia, home to the country’s largest rare earth resources, has closed residential compounds in the city center and ordered work to stop at most businesses.
Copper rose 2.1% to $9,972 a tonne on the London Metals Exchange at 10:54 a.m. in Shanghai, after falling 3.4% on Monday. Zinc gained 1.5% and aluminum 1.4%. Iron ore rose 3.6% to $141.05 in Singapore, after plunging more than 9% on Monday. Steel rebar and hot rolled coil also advanced in Shanghai.
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