China’s appetite for major commodities has been growing at robust rates, exceeding expectations set by Goldman Sachs. Copper demand has risen by 8% year on year, while iron ore and oil demand has increased by 7% and 6% respectively. This surge in demand can be attributed to strong growth in the green economy, grid, and property completions. Despite the struggles faced by China’s property sector, the green economy has shown significant strength, leading to a surge in demand for metals related to the green transition, such as copper. The installation of onshore solar panels has played a crucial role in China’s green copper rush. In fact, the operating solar capacity in China is more than the rest of the world combined. China’s aim to double its wind and solar capacity ahead of its 2030 goals further contributes to the increased demand for commodities.
China’s green copper demand has risen by an astounding 71% in July compared to the previous year. The significant increase is primarily driven by the surging demand for solar-related products. The growth in China’s manufacturing sector has also influenced the demand for base metals like aluminum. The improvement in manufacturing trends and growing import levels of base metals indicate a positive outlook for the demand of these materials. China’s industrial production has grown by 4.5% in August, beating expectations. Within the industrial production category, equipment manufacturing has grown by 5.4% year on year. Goldman Sachs predicts that the demand growth for metals will continue, supported by the current positive drivers.
China’s oil demand has been rising due to the rapid recovery of oil-intensive sectors like transportation. Record internal mobility and robust congestion and flight data indicate a sustainable level of oil demand. However, Goldman Sachs expects the growth rate to decelerate significantly next year. Despite the surge in commodities demand, there is a wider macroeconomic growth story in China that faces challenges. The stock market is still struggling, creating a split between commodities and other asset classes. Nevertheless, some economists believe that commodities are a better bet for a marginal improvement in the Chinese real economy.
The People’s Bank of China (PBOC) has played a significant role in boosting the demand for commodities through monetary expansion. The central bank aims to maintain stable credit expansion and sufficient liquidity through macro policy adjustments. Traders in the Chinese market perceive commodities as a better investment option, given the potential marginal improvement in the Chinese real economy in the future.
China’s demand for major commodities has experienced significant growth, driven by the green economy and recovery in the manufacturing sector. The surge in demand for copper, iron ore, and oil highlights the country’s commitment to renewable energy and infrastructure development. Despite the challenges faced by the wider macroeconomic growth story, traders continue to see commodities as a better investment option, capitalizing on the potential marginal improvement in the Chinese real economy. As China continues to prioritize sustainable development and green initiatives, the demand for commodities is expected to remain strong in the foreseeable future.
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