Industrial metals markets: Damper as Chinese government sets a growth target of 5%

The industrial metals markets received a damper at the beginning of the week as the Chinese leadership set a growth target of 5% for this year at its National People's Congress, which was below the expectations of many market participants. No more far-reaching stimulus measures were announced either. Nevertheless, markets recovered quickly, which seems justified given that sentiment indicators for January and February had been above expectations and signalled a strong recovery in demand. Moreover, meetings are still being held until 13 March, so more information on Beijing's economic priorities may leak out.

Meanwhile, trade data for January and February were mixed, failing to provide clear direction for the industrial metals markets. Copper ore imports were robust, up 11.7% year-on-year, while steel product imports were around 44% below the previous year. In contrast, iron ore imports increased by 7%, indicating a pick-up in steel production. The figures are also difficult to interpret due to the New Year effect, which is why the data for January and February are also issued in aggregate. A clearer picture should only be provided by the March data. Until then, continued uncertainty about the strength of the recovery is likely to limit the upside potential in industrial metals prices.

Source: Commerzbank Research, Photo: Fotolia