China Congress Meeting Key for Metal Prices — Third-Quarter Report

The price at which industrial metals such as copper and zinc will trade for the rest of this year will likely be set in October, at the Chinese Communist Party’s National Congress.

Optimism over Chinese economic growth helped power metals to multiyear highs in early September, but prices have since given up some of those gains, as the dollar perked up and investors questioned whether demand would be enough to justify the rally.

Now market players will be monitoring the twice-a-decade congress, where the China’s governing body is expected to lay out its economic aims and growth forecasts for the year ahead.

China consumes about half of global metal production, and some analysts are concerned that top party officials could cut the country’s growth target.

“The key issues the market will be watching for at the congress will be to see if [President Xi Jinping] lowers China’s growth target below 6.5%” and whether he will further reduce capacity of metals smelters, said Robin Bhar, head of metals research at Société Générale.

In February, the Chinese government announced a raft of environmentally driven regulations aimed at limiting the smog that plagues the country’s cities during the winter. Those directives included cuts to the capacity of metals smelters, and they have been a major factor in pushing up base metals prices — especially those of aluminum and zinc.

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