“Dr. Copper” settled at the lowest price in more than three months this week, marking a drop of more than 20 percent from record highs in May.
China's economy performed better than anticipated at the beginning of this year, driven primarily by substantial growth in high-tech manufacturing. The National Bureau of Statistics reported a 5.3 percent increase in Gross Domestic Product (GDP) for the first quarter compared to the previous year, surpassing the 4.6 percent growth forecasted by a Reuters poll of economists. This also represented an improvement from the 5.2 percent growth seen in the last quarter of the previous year.
However, in the second quarter, China's GDP rose by 4.7 percent year-on-year, falling short of the expected 5.1 percent growth from the same Reuters poll. June's retail sales also underperformed, growing by only 2 percent against a projected 3.3 percent increase. Conversely, industrial production in June exceeded expectations, achieving a 5.3 percent year-on-year growth compared to the 5 percent estimate by Reuters.
Overall, the first half of the year saw China's economy maintaining general stability and steady progress. This period was characterized by a steady increase in production, a sustained recovery in demand, stable employment and prices, rising household incomes, and accelerated growth in new economic drivers, all contributing to highquality development. Preliminary estimates indicate that the GDP for the first half of 2024 reached 61,683.6 billion yuan, a 5.0 percent year-on-year increase at constant prices. By sector, the primary industry contributed 3,066.0 billion yuan, up by 3.5 percent year-onyear; the secondary industry added 23,653.0 billion yuan, up by 5.8 percent; and the tertiary industry accounted for 34,964.6 billion yuan, up by 4.6 percent.
In response to the slower economic performance in the second quarter, Beijing unexpectedly cut major short- and long-term interest rates for the first time since August last year. This move aimed to stimulate growth in the world's second-largest economy and came shortly after a key Communist Party leadership meeting. The rate cuts included the central bank's key short-term policy rate, its market operations rates, and benchmark bank lending rates, following weaker-than-expected second-quarter economic data. China is on the brink of deflation and is grappling with a prolonged property crisis, rising debt, and weak consumer and business confidence. Additionally, global trade tensions are escalating as international leaders become increasingly cautious of China's dominance in exports.
Additionally, China will allocate 300 billion yuan ($41.40 billion) in ultra-long treasury bonds to support a programme of equipment upgrades and consumer goods trade-ins, the government said on Thursday, in the latest step to spur an economic recovery. According to the notice China will raise subsidies for qualified buyers of new energy passenger cars to 15,000-20,000 yuan each. Buyers of some home appliances including televisions, air conditioners and computers will get subsidies equivalent to 15-20 percent of their sales prices, but the subsidy for each item will not exceed 2,000 yuan.
Analysts have cautioned that the effects of these stimuli are likely to be modest. The first broad interest rate reduction since last August did little to stimulate buying interest in iron ore and copper - commodities heavily influenced by China's construction and manufacturing sectors. Although Dalian iron ore futures rebounded from a three-session decline this Friday, buoyed by new stimulus from China, they still posted a weekly loss due to concerns over demand from the struggling property sector. Commodity analysts noted that while the stimulus package is positive for manufacturing activity, its overall scale is insufficient to counteract the ongoing downturn in the construction sector. Reports of increasing iron ore and steel inventories in China have also negatively affected market sentiment. Similarly, copper prices were headed for their third consecutive weekly decline today. Copper fell below the $9,000-perton threshold for the first time since early April, driven by a global stock market selloff and growing pessimism about demand prospects in China. The industrial metal has dropped by about 20 percent since hitting a record high in mid-May. Initial bullish expectations of a tightening supply and a significant surge in usage have given way to deep concerns about rising inventories and weak conditions in the Chinese spot market.
At this juncture, Baltic indices have shown a lack of vitality, with market sentiment being notably subdued compared to previous summers. The Capesize segment, which is heavily influenced by China’s economic activity, saw a 12.1 percent drop since last Friday, finishing today at a two-month low of $21,676 per day. In contrast, the Panamax sub-market made a notable impression this week, with rates climbing to $16,125 daily, fueled by China's robust demand for grain imports. Meanwhile, the geared segments experienced a rather uneventful week, with both the Supramax and Handysize indices holding steady at $15,246 and $13,670 per day, respectively, showing little change.
Data source: Doric