Commodities Chart Pack (July 2024)

China overcapacity fears coming to industrial metals

China’s dominant role in the world of commodities is evolving subtly. This is particularly the case for gold, where increased demand by the PBoC and Chinese retail investors has weakened the importance of the traditional drivers of the gold price. Meanwhile, the pick-up in China’s demand for LNG has helped push up European natural gas prices this year too. But perhaps the most significant shift is taking place in industrial metals markets, where the combination of weaker demand in China and stronger-than-expected supply is culminating in increased exports of many metals, including nickel, copper, and steel. Crucially, with a looming crunch in construction activity set to weigh heavily on Chinese demand for industrial metals, and the increase in China’s smelting capacity a symptom of wider overcapacity fears, this will be a recurring theme in the coming months and years.