The China-driven metals ‘super cycle’ is over

With China facing a falling population and geopolitical challenges, longer-term demand will now be dominated by the US and Europe, Jefferies analysts led by Christopher LaFemina said in a note.

“China is more likely to be a headwind than a tailwind for demand over the next decade,” they said. The China super cycle, driven by urbanization and industrialization, is over, and the energy transition and decarbonization cycle has just begun, the analysts said.

Asia’s largest economy has been a crucial support for metals markets over the last two to three decades as the country went on an infrastructure-building binge. However, China’s plodding post-virus recovery shows it may lack the horsepower required to buoy global demand as it transitions to a more service-oriented economy.

That dynamic has been reflected in markets this year, with most metals falling even after Beijing abandoned its Covid Zero policy at the end of last year.

Iron ore declined 0.7% at 12:46 p.m. Singapore time to $110.85 on Friday and was down 2.3% for the week. The steel-making staple has now wiped out all of its gains from earlier in the year as optimism about China’s recovery faded.

Copper fell 0.5% to $8,534 a ton on the London Metal Exchange, with the key industrial bellwether trading slightly higher than where it was at the start of the year. Aluminum was down around 3% for the week, and has been on a downward trend since late January.