Copper prices in China have barely budged since the central bank cut interest rates and the government announced 33 measures to rescue the economy from the clutches of its Covid Zero policy.
Given the wide range of copper’s applications, from construction to white goods and renewable power, it might seem odd that such a broad response from the authorities has failed to provoke much enthusiasm among buyers. However, it may be that the bulk of the stimulus, particularly around freeing up lending, has actually been skewed to bandaging Beijing’s self-inflicted wounds in the real estate sector.
[Click here for an interactive chart of copper prices]
And Chinese demand for property is in the deep freeze. While lockdowns or the threat of them persists, buying a new home is probably the last thing on people’s minds.
The government’s efforts to stimulate the property market have become “oversaturated,” said Jia Zheng, a metals trader at Shanghai Dongwu Jiuying Investment Management Co. “There aren’t enough effective policies to bolster the real economy including infrastructure and manufacturing,” she said. “Investors want to see stimulus in things like new energy and the transformation of heavy industry.”
Construction accounts for some 20% of China’s copper demand, according to UBS AG. The other big components are appliances at 18% — and buying big-ticket consumer goods often accompanies a home purchase — and electrical infrastructure at 31%.