Chinese Commodities Shrug at Xi’s Pledge as Lockdowns Hit Demand

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(Bloomberg) — Industrial commodities prices in China hardly registered President Xi Jinping’s call for an “all-out” push on infrastructure spending, as markets assess the ongoing damage to demand from the nation’s series of virus-related lockdowns.

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Although iron ore futures in Dalian rose, the gains barely put a dent in the losses recorded so far this week. Copper in Shanghai actually fell.

The government has plenty of room for more fiscal stimulus, including resources left over from last year, according to Bloomberg Economics. But a slowdown in investment in March “suggests physical constraints from the stringent virus-containment measures are making it difficult for government support to reach the economy,” BE said.

The good news is that the outbreaks in Shanghai and Beijing are showing tentative signs of easing. But that tide could quickly turn, for markets at least, if it allows the authorities to draw the conclusion that their Covid Zero policies are a resounding success.

In the meantime, the evidence is piling up that Chinese commodities demand is facing its biggest challenge since the lockdowns at the beginning of the pandemic. Bloomberg Intelligence estimates that crude imports could drop by almost a fifth in April because of mobility restrictions. The purchasing managers’ indexes due in coming days are expected to have tumbled further into contraction. And according to satellite data, Chinese port activity has fallen below the levels seen in early 2020, while construction has plummeted, suggesting that conditions will only worsen if Covid lockdowns spread.

That leaves metals-intensive infrastructure spending as the main lever available to the government to keep its growth targets in sight.

“We expect that Chinese stimulus will lean heavily on the fiscal impulse to achieve the nation’s ambitious growth target, with infrastructure a key source of growth,” TD Securities said in a note.

Today’s Events

(All times Beijing unless shown otherwise.)

  • CCTD webinar on Chinese coal demand, 15:00

  • China Offshore Wind Power Conference, Guangzhou, day 2

  • EARNINGS: China Coal, Shenhua Energy, BYD, Huayou Cobalt, Longi Green, Sinopec, Longyuan Power, China National Nuclear Power, Trina Solar, HKEX, Hitachi Construction

On The Wire

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  • China Shenhua Approved to Expand Coal Capacity by 4.6M Tons

  • China NDRC Vows to Strengthen Coal Price Supervision

  • CHINA REACT: Industrial Profits Hold Up Under Lockdowns, for Now

  • WH Group Posts Better U.S. Margin, China Improving: Street Wrap

The Week Ahead

Thursday, April 28

  • Fortescue Metals quarterly production report

  • World Gold Council quarterly global demand report, 08:30

  • Sinopec 1Q earnings call, 09:00

  • China Coal 1Q online earnings briefing, 15:00

  • Cnooc 1Q earnings call, 17:35

  • China Offshore Wind Power Conference, Guangzhou, day 3

  • EARNINGS: Gotion High-Tech, China Moly, China Oilfield Services, Jiangxi Copper, Anhui Conch, Baosteel, Cnooc, Sany Heavy, Komatsu, Caterpillar

  • Glencore quarterly production report

Friday, April 29

  • China Caixin factory PMI for April, 09:45

  • Shenhua Energy 1Q online earnings briefing, 11:00

  • China weekly iron ore port stockpiles

  • Shanghai exchange weekly commodities inventory, ~15:30

  • EARNINGS: Tianqi Lithium, Yangtze Power, PetroChina, Maanshan Steel, JA Solar

Saturday, April 30

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