LME WEEK 2016: Markets too gloomy on China; signs of better growth emerging - Adams

China will remain a dominant presence in the global metals market, Metal Bulletin analyst William Adams said, warning against dwelling on the negatives too much while acknowledging the risks the country faces.

China became a major force in the metals market in the 2000s and will remain so, Adams said at this year’s LME Week Seminar on Monday October 31.

“Although I do not see anything to suggest it will not be a dominant player, we probably need to be careful that we do not take our eyes off the fact that there are other emerging markets that will collectively become big players,” he said.

The other EM economies are likely to go through rapid growth spurts, Adams noted.

“If this happens in a concerted fashion, that could be see producers struggle to come up with a sufficient supply response – especially if capital investments have been reined in in recent years,” he said.

Sentiment has become too gloomy given that signs of better economic growth are emerging, Adams noted.

China is the second-largest economy in the world; for a $11.4-trillion economy, GDP growth of 6.7% growth is massive, he said.

Also, the One Belt One Road projects seem to getting off the ground, with the country’s central bank guaranteeing loans to local governments. The run-up in iron ore and steel prices this year implies a degree of restocking already, Adams noted.

Another structural issue was that the stimulus policies in the aftermath of the financial crisis ultimately brought future demand forward, which left something of a vacuum and which explains soft economic data out of the country in recent months, he said.

“We have been travelling through that vacuum, hence lower growth in recent years, but we may be coming out the other side – boosted by more infrastructure projects – but this time not building ghost towns or bridges to nowhere but projects that will foster economic growth such as the One Belt One Road ones,” he said.

The Caixin manufacturing PMI has been trending higher. While it may be around the 50 level that separates growth from contraction, the trend is noteworthy, he noted.

Finally, local authorities now seem to be exerting more control on surplus/excess/obsolete capacity, which should help rein in supply. Environmental inspections and closures seem to have been much more widespread this year than they have for a long time, Adams said.

This article was first published on www.fastmarkets.com

What to read next
Fastmarkets proposes to amend the specifications for its weekly payable indicators for black mass in South Korea.
Learn why delayed universal definitions of green steel means pricing green steel remains a challenge
Fastmarkets has launched two new Green Steel prices for the European domestic market, starting Thursday June 8.
Learn more on why advancements in “green steel” considered unachievable in geographical isolation and require the collaboration of all stakeholders in all regions if they are to succeed.
Fastmarkets has corrected the rand fixing prices for LME-traded base metals, which were published incorrectly on Tuesday June 6 due to a technical error.
Fastmarkets will discontinue its consumer buying assessment for steel scrap rail crops 2ft max, delivered mill Chicago, effective July 1 amid a sustained lack of liquidity for that grade in that market.
We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.