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- Slowing growth in China to drag industrial metal prices lower by end-2021 - Capital Economics
Slowing growth in China to drag industrial metal prices lower by end-2021 - Capital Economics
FXStreet notes that the prices of industrial metals have continued to climb higher in recent months as fiscal stimulus in China has prompted a surge in demand. In fact, since the start of the year, the price of copper has risen by around 12% and aluminium by 6%. Despite this, strategists at Capital Economics think that prices will end the year lower.
“Prices seem to have lost touch with their fundamentals. For one, our in-house metals demand proxies suggest that prices cannot be justified by consumption patterns. What’s more, the latest PMI data suggest that economic activity in China is beginning to slow, with construction particularly hard hit.”
“Supply is set to bounce back. We expect production to revive strongly this year, in large part because virus-related restrictions on output will be eased. Moreover, high prevailing prices mean that firms are likely to maximise their output.”
“Prices may hold up in the first half of 2021, as investor risk appetite remains high and the global economy continues to recover, but we are confident that prices will fall by year-end. That said, we expect that in many cases prices will still be higher than their pre-virus levels.”
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