China’s abandonment of Covid Zero is stirring hopes that a demand recovery in the world’s biggest commodities importer will boost prices once the country gets over the current virus wave.
Beijing’s retreat from virus controls since early last month has aided sentiment across raw materials. Traders are piling into iron ore futures, copper is rising despite the prospect of recessions in the US and Europe, and there’s talk of record annual soybean imports. China is also expected to buttress global oil demand this year.
There are still daunting risks, however, not least the severe Covid—19 wave that’s sweeping across Asia’s biggest economy. That’s a shaky starting point, but a stronger recovery is expected to eventually take hold. China’s GDP will rise 4.8% in 2023, compared with a meager 3% last year, according to a Bloomberg survey.
“It will definitely be a better year in 2023,” said Jia Zheng, a commodities trader at Shanghai Dongwu Jiuying Investment Management Co. “The first quarter might be the worst period as various economic policies are yet to take effect, but we will start to see improvement from the second quarter onwards.”
The shape of China’s recovery will help steer world commodities after they eked out a gain of around 7% last year. That came after a surge in prices in the wake of Russia’s invasion of Ukraine, followed by a gradual pullback on aggressive monetary tightening and slowdowns in major economies.
