Metals Feel Chill as Beijing Shies Away From Major Stimulus

(Bloomberg) -- Commodities from iron ore to copper fell after China set a cautious economic growth target of about 5% for the year and didn’t announce any major new stimulus.

The goal unveiled at the National People’s Congress was below what most economists had been expecting, giving Beijing more room for maneuver after it missed last year’s target by a wide margin. The absence of a landmark announcement to boost real estate and infrastructure is damping enthusiasm among metals investors.

None of the official documents released so far at the NPC suggests authorities are keen on the kind of massive boost deployed to right the economy after the global financial crisis or at the beginning of the pandemic. The target for local government bond sales — the backbone of infrastructure investment that drives the bulk of raw materials demand — was also modest.

“The NPC sent the message that the government only aims to support and stabilize the economy, instead of issuing massive stimulus,” said Jiang Hang, head of trading at Yonggang Resources Co. Overseas investors have been overly optimistic about the potential for more stimulus and bulls have “bet too heavily” on metals like copper, he said. 

Iron ore dropped 2.2% to $122.70 a ton as of 12:00 p.m. in Singapore. The decline in the steel-making ingredient may also be partly down to a statement from the National Development and Reform Commission on Friday in which it said gains in the market had been “overly fast.”

Shares of major iron ore miners retreated. BHP Group Ltd. fell as much as 1.1% in Sydney and Rio Tinto Ltd. lost as much as 2.2%.

“It looks likely that China’s infrastructure‑related commodity demand impulse may ease this year” and it’s less likely to use debt to prop up the economy, Commonwealth Bank of Australia analyst Vivek Dhar said in a note. However, raw materials consumption will probably remain strong in the first half on pent-up demand from the re-opening at the end of last year, he said.

Copper fell 0.6% to $8,932 a ton on the London Metal Exchange, zinc lost 1.1% and aluminum declined 0.5%. Brent oil moved 0.7% lower, while gold was down 0.1%. 

There was some good news from the NPC for agricultural markets. Beijing announced it would push to increase grain production capacity by 50 million tons a year as part of its drive to bolster food security. No set timeline for the target was given, however. 

China’s grain harvest was 686.55 million tons in 2022, the National Development and Reform Commission said in a report, and has been stable at over 650 million tons since 2015, according to state media.

Soymeal rose 0.5% on the Dalian Commodity Exchange, while corn fell 0.4%.

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