An oil pump at sunset in Daqing, Heilongjiang province, China, July 13, 2006.
Lucas Chiffres | getty images
Goldman Sachs said in a recent note that demand for many key commodities in China was growing at “strong rates.”
The investment bank noted that demand for copper in China rose 8% year on year, while demand for iron ore and oil rose 7% and 6% respectively, well above Goldman’s full-year expectations.
“This strength in demand is largely driven by a combination of strong growth from the green economy, grid and asset completions,” the Goldman report said.
While China’s troubled property sector is still struggling to recover, the investment bank said China’s green economy has shown “significant strength” so far this year, resulting in demand for green transition-related metals, such as copper. developed.
Goldman economists attributed the green copper boom in China largely to its onshore solar installations, which so far in 2023 are “on par with the level of installations in all previous years.”
Molten copper flows into a mold at a smelting plant in Wuzhou, China.
He Huawen Visual China Group | getty images
China’s operational solar capacity has reached 228 GW, more than the rest of the world June report of Global Energy Monitor Said. And the world’s second-largest economy is on track to double its wind and solar capacity Five years ahead of our 2030 goals,
China’s demand for green copper rose 71% in July from a year earlier, according to data compiled by Goldman Sachs.
“The most significant strength has come from the renewable energy sector, where demand for copper is up 130% year-over-year, led by a surge in solar-related demand,” Goldman wrote in a separate report dated Aug. 25.
The improvement in China’s manufacturing sector is also increasing the demand for base metals like aluminium.
“The improvement in manufacturing trends so far in the third quarter coincides with strong import levels of base metals,” the report said.
China’s industrial output rose 4.5% in August from a year earlier, beating expectations for a 3.9% rise. And within that category, the added value of equipment manufacturing increased 5.4% year over year.
Goldman predicted that demand for these metals will continue to increase.
“Given the current positive factors, we see a supportive base for onshore aluminum and copper demand next year,” the report forecast.
China’s oil demand is also rising due to a “rapid recovery” in oil-intensive service sectors such as transportation, although analysts say it may decline.
“China’s oil demand has been supported by record internal mobility, as indicated by strong congestion and domestic flight data,” Goldman said.
“In our view, this strong level is sustainable, although we expect growth to slow significantly next year.”
Commodities have surged despite a broad, faltering macroeconomic growth story in China.
“You’re actually seeing commodities reacting to (the People’s Bank of China’s) monetary expansion, while the Chinese stock market is still trying to move lower,” said Hao Hong, chief economist at Groww Investments.
“So you’re seeing a big divide between the two asset classes,” Hong told CNBC on Tuesday.
Recently PBOC announced It will continue to promote macro policy adjustment while maintaining stable credit expansion and adequate liquidity.
“For now, traders in the Chinese market view commodities as a better bet for a modest recovery in the Chinese real economy,” he said.
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