China sets ambitious 5% GDP growth target on opening day of Two Sessions meetings in Beijing
\nBut there is little indication on whether stimulus measures will support real estate, construction and upstream iron ore prices
\nIn coal, Tigers Realm fights for survival in Russian sanction hearings<\/p>\n
One of the most significant events of the year for bulk commodity markets is upon us, with around 3000 delegates of the National People\u2019s Congress gathering in Beijing to theoretically debate but really just find out what the people actually running the show \u2014 Xi Jinping \u2014 have to say.<\/p>\n
It\u2019s a big deal though for iron ore and met coal markets, as well as broader steel pricing, because it will give a sense of how far China is willing to take stimulus measures to 1) meet its 5% GDP growth target, confirmed yesterday, and 2) inject capital into beaten down areas of the economy which consume steel like construction, real estate and manufacturing.<\/p>\n
China\u2019s wayward economy and high youth unemployment levels are among the biggest challenges facing the heavily autocratic rule of Xi Jinping.<\/p>\n
Timing wise it\u2019s an important juncture as well, given the country is moving into what is generally considered the peak construction season following the exit of the lull period during the Lunar New Year holiday.<\/p>\n
Iron ore entered 2024 at unexpectedly strong levels, paying in excess of US$140\/t.<\/p>\n
But hopes for \u2018bazooka style\u2019 stimulus measures have waned, forcing sentiment to the downside. Singapore futures now sit at US$114.45\/t.<\/p>\n
RBC\u2019s Australian analysts, led by Kaan Peker, see support for iron ore over the first half of 2024.<\/p>\n
They\u2019ve previously noted around 10-15Mt of expected supply was at risk of exiting the market, with shipments up to mid-February at Port Hedland down 15% amid a Fortescue (ASX:FMG)<\/a> train derailment and wet weather and Sino Iron lopping 7Mt of its production forecasts due to land disputes with the tenaciously litigious billionaire and former parliamentarian Clive Palmer.<\/p>\n But it remains to be seen if the CCP can actually patch up its economic boat without letting more water into the ship.<\/p>\n \u201cConscious of its high debt levels, Beijing is expected to support its pro-growth stance via increased fiscal spend, while keeping credit growth in check,\u201d RBC\u2019s Peker, Paul Wiggers de Vries and Alexander Barkley said. <\/p>\n \u201cWhile we don\u2019t expect the NPC to fix what ails its economy, we expect policy to support a cyclical upturn and improvements in key areas of the economy, but possibly reverse later in 2024 as the benefit of policy fades (2H24 commodity demand will increasingly depend on normalisation of global growth\/RoW loosening monetary policy). <\/p>\n \u201cNear-term, the most upside potential we see is for copper prices, which we forecast to be in a deficit this year exacerbated by low inventory levels. <\/p>\n \u201cWe also expect iron ore to be supported over 1H24, with a pickup in blast furnace utilisation post CNY.\u201d<\/p>\n \u00a0<\/p>\n The NPC and the Chinese People\u2019s Political Consultative Conference tend to have a direct impact on commodity demand.<\/p>\n China is the world\u2019s largest processor and refiner of a host of commodities and comfortably its largest steelmaker.<\/p>\n Steel output in China accounts for almost 60% of global production and around 75-80% of iron ore exports, largely sourced from Australia and Brazil.<\/p>\n In a previous note, RBC suggested prices would average US$130\/t in the first quarter before slipping to US$95\/t in the fourth quarter \u2014 a consequence of a second half weighted 32Mt surplus.<\/p>\n But China has surprised before. Last year its iron ore port stockpiles hit multi-year lows as it lightly increased steel production for the first time since hitting a peak of 1.065Bt in 2020.<\/p>\n That was supported by strong exports despite weak pricing at home. China\u2019s steel sector has continued to add capacity in recent years, putting pressure on margins.<\/p>\n Yet it remains heavily reliant on Australian and Brazilian iron ore to operate. S&P Global says EAF plants \u2014 which used scrap steel and are cleaner than blast furnaces \u2014 could boast 17.6% of China\u2019s steelmaking capacity after 2024.<\/p>\n But the prospects of increasing output from 10% to 15% of China\u2019s crude steel production by next year are fraught due to a lack of cheap scrap steel in the young Chinese supply chain.<\/a><\/p>\n Some gains have been seen coming out of Lunar New year, with SteelHome reporting the China Iron and Steel Association saw output from its member mills lift 1.5% in the period from February 11-26.<\/p>\n \u00a0<\/p>\n Despite the 5% growth target, Peker et. al. said RBC did not expect to see a massive wave of stimulus measures.<\/p>\n \u201cIn 2018, Beijing (in the GWR) opted to give implicit guidance by abandoning targets for money supply growth. Instead, Beijing committed that money supply would expand in-line with GDP,\u201d they said.<\/p>\n \u201cAlthough a more accommodating approach could be announced, as evidenced in 2020, which called for significantly higher money supply growth compared to the prior year; however, we think this scenario is unlikely. <\/p>\n \u201cWe note that recent communications\/messaging suggests that Beijing is focused on targeted spending rather than substantial increases in lending.\u201d<\/p>\n Among the headline numbers was a 7.2% increase (on par with 2023) in defence spending to US$262b announced by Premier Li Qiang yesterday. It dovetails with continued support for the One China policy and repudiation of US involvement in the status of Taiwan.<\/p>\n There was little large scale stimulus announced though. The Dalian exchange\u2019s response showed the ho-hum nature of Li Qiang\u2019s presentation for iron ore investors.<\/p>\n Its most traded contract for May softened in the afternoon to a 0.68% gain, fetching the equivalent of US$122.25\/t at 6.30pm AEDT.<\/p>\n \u00a0<\/p>\n Scroll or swipe to reveal table. Click headings to sort.<\/em>\n<\/p>\n CODE COMPANY PRICE WEEK RETURN % MONTH RETURN % 6 MONTH RETURN % YEAR RETURN % MARKET CAP ACS Accent Resources NL 0.01 0% 43% 25% -60% $ 4,731,272.83 ADY Admiralty Resources. 0.006 -14% -40% 0% -14% $ 7,821,474.92 AKO Akora Resources 0.155 -3% 11% -16% 11% $ 14,722,336.17 BCK Brockman Mining Ltd 0.028 4% 17% 6% 8% $ 259,846,499.67 BHP BHP Group Limited 44.63 2% -6% -3% -8% $ 224,190,360,779.01 CIA Champion Iron Ltd 7.74 -2% -10% 22% -3% $ 4,039,785,562.80 CZR CZR Resources Ltd 0.255 -7% -18% 70% 28% $ 63,648,354.42 DRE Dreadnought Resources Ltd 0.018 -10% -5% -67% -77% $ 66,149,886.24 EFE Eastern Resources 0.008 14% 0% -11% -50% $ 9,935,571.69 CUF Cufe Ltd 0.013 -7% -28% 0% -35% $ 14,899,460.75 FEX Fenix Resources Ltd 0.245 0% -6% 4% -2% $ 163,235,211.20 FMG Fortescue Ltd 25.84 -7% -13% 28% 14% $ 78,082,550,320.48 RHK Red Hawk Mining Ltd 0.65 0% -7% -16% 38% $ 115,854,280.32 GEN Genmin 0.160002 0% 0% 0% -13% $ 79,339,701.97 GRR Grange Resources. 0.455 6% -3% -2% -54% $ 520,802,414.10 GWR GWR Group Ltd 0.092 -3% -3% 6% 48% $ 30,194,365.57 HAV Havilah Resources 0.15 0% -12% -42% -58% $ 47,495,881.50 HAW Hawthorn Resources 0.075 -10% -9% -35% -25% $ 25,796,202.20 HIO Hawsons Iron Ltd 0.034 0% 0% 3% -51% $ 33,086,558.12 IRD Iron Road Ltd 0.059 -6% -2% -30% -41% $ 48,522,968.45 JNO Juno 0.071 -7% -16% 0% -9% $ 12,190,332.42 LCY Legacy Iron Ore 0.015 0% -12% -6% -17% $ 89,695,566.79 MAG Magmatic Resrce Ltd 0.044 19% 26% -27% -52% $ 13,450,483.11 MDX Mindax Limited 0.04 0% -15% -20% -38% $ 81,822,351.20 MGT Magnetite Mines 0.28 8% 4% -25% -55% $ 29,530,357.50 MGU Magnum Mining & Exp 0.016 -16% -11% -61% -16% $ 12,949,782.45 MGX Mount Gibson Iron 0.45 -7% -15% 2% -25% $ 564,920,935.85 MIN Mineral Resources. 64 0% 8% -13% -28% $ 12,960,378,819.20 MIO Macarthur Minerals 0.125 4% -4% -42% -11% $ 20,781,686.00 PFE Panteraminerals 0.054 10% -13% -21% -51% $ 13,261,783.65 PLG Pearlgullironlimited 0.029 -22% -12% 26% -24% $ 5,727,170.12 RHI Red Hill Minerals 5.75 10% 16% 37% 26% $ 334,214,625.10 RIO Rio Tinto Limited 124.77 2% -5% 7% -1% $ 45,811,792,969.74 RLC Reedy Lagoon Corp. 0.004 0% 0% -33% -54% $ 2,478,162.93 CTN Catalina Resources 0.004 -20% -20% 0% -43% $ 4,953,947.57 SRK Strike Resources 0.05 25% 32% -7% -35% $ 13,620,000.00 SRN Surefire Rescs NL 0.011 10% -8% -27% -21% $ 21,594,735.94 TI1 Tombador Iron 0.014 0% 0% -33% -39% $ 30,218,753.22 TLM Talisman Mining 0.19 9% 0% 27% 31% $ 33,897,662.82 VMS Venture Minerals 0.024 50% 200% 100% 9% $ 46,550,273.74 EQN Equinoxresources 0.255 -12% 2% 82% 38% $ 24,282,000.72 AMD Arrow Minerals 0.006 50% 0% 140% 0% $ 43,102,590.58 <\/p>\n WordPress Table Plugin<\/a><\/p>\n \u00a0<\/p>\n Less sensitive to the whims of the Chinese Government, thermal coal has continued its February gains, with front month futures for Newcastle 6000 kcal product rising back to US$140\/t.<\/p>\n Coking coal futures, which are more sensitive to Chinese policy, were up 1% to US$309\/t, still fetching an enormous premium they\u2019ve maintained for the past year.<\/p>\n Whether there will be much upside for Aussie coal remains to be seen as stagnant North Asian gas prices make more expensive thermal coal supplies less attractive.<\/p>\n Meanwhile, Tigers Realm Coal (ASX:TIG)<\/a> faces the prospect of shutting down its operations at the Amaam project in Russia after Federal Court proceedings began this month looking into whether the company is breaking Australian Government sanctions imposed after the Russian invasion of Ukraine.<\/a><\/p>\n TIG has made an application seeking a ruling that its operations do not come under the definition of exporting goods from a sanctioned country.<\/p>\n The company reported a net profit of $46.1 million for 2023, sold 1.27Mt of coal last year including both thermal and coking coal cargoes to Chinese and Russian customers.<\/p>\n Its board of directors includes Sirtex Medical founder Dr Bruce Gray, while one of its top shareholders is the Russian Direct Investment Fund.<\/p>\n \u00a0<\/p>\n Scroll or swipe to reveal table. Click headings to sort.<\/em>\n<\/p>\n CODE COMPANY PRICE WEEK RETURN % MONTH RETURN % 6 MONTH RETURN % YEAR RETURN % MARKET CAP NAE New Age Exploration 0.004 0% -11% -20% -33% $ 8,969,494.55 CKA Cokal Ltd 0.105 5% 5% -9% -36% $ 104,658,051.06 BCB Bowen Coal Limited 0.061 5% -8% -48% -76% $ 176,328,340.88 SVG Savannah Goldfields 0.03 3% -21% -56% -83% $ 8,189,455.20 GRX Greenx Metals Ltd 1.035 4% 2% 11% 39% $ 290,946,526.76 AKM Aspire Mining Ltd 0.19 6% -10% 90% 228% $ 96,451,027.15 AVM Advance Metals Ltd 0.039 26% 8% -68% -78% $ 1,563,313.21 YAL Yancoal Aust Ltd 6.22 9% 5% 13% 0% $ 8,199,928,903.77 NHC New Hope Corporation 4.71 6% -11% -20% -18% $ 3,956,169,971.52 TIG Tigers Realm Coal 0.005 -17% -9% -17% -58% $ 65,333,511.84 SMR Stanmore Resources 3.44 0% -12% 13% -7% $ 3,046,703,722.92 WHC Whitehaven Coal 7 1% -15% 9% -7% $ 5,822,741,456.64 BRL Bathurst Res Ltd. 0.85 2% -7% -16% -22% $ 160,742,215.20 CRN Coronado Global Res 1.38 4% -14% -17% -29% $ 2,330,270,684.70 JAL Jameson Resources 0.031 3% -3% -39% -57% $ 13,507,732.98 TER Terracom Ltd 0.24 -11% -20% -55% -69% $ 192,231,896.40 ATU Atrum Coal Ltd 0.004526 0% 0% 0% -29% $ 11,966,853.96 MCM Mc Mining Ltd 0.14 0% 0% -7% -35% $ 57,104,704.16 DBI Dalrymple Bay 2.75 -1% -2% 1% 11% $ 1,368,302,200.92 AQC Auspaccoal Ltd 0.061 -15% -38% -47% -65% $ 32,316,958.23 <\/p>\nDirect impact on commodity demand<\/h2>\n
Back to the Two Sessions<\/h2>\n
ASX iron ore stocks<\/h2>\n
Thermal coal continues comeback<\/h2>\n
ASX coal stocks<\/h2>\n