England’s next stage of lockdown easing will go ahead as planned as the rate of COVID-19 infections in the country reaches its lowest level since September.
(Bloomberg) -- Iron ore futures surged more than 10% and copper jumped to a record amid growing bets they’ll be among the biggest winners from a commodities boom that’s stoking concerns about inflation around the world.While market participants struggled to pinpoint a trigger for Monday’s gains, they cited several ongoing trends including optimism that central banks will retain supportive policies even as the global economy recovers. Expectations China will tighten environmental rules have added to the bull case for copper -- seen as vital to the green energy transition -- and fueled speculation that steelmakers may front-load iron ore purchases before new curbs kick in.The gains add to a more than yearlong surge in raw-materials prices that has shifted into overdrive in recent weeks, with the Bloomberg Commodity Spot Index climbing for 14 of the past 15 days to the highest level in almost a decade.A “Goldilocks scenario” may be forming as strengthening global growth combines with restrained wage pressures and a dovish Federal Reserve, Goldman Sachs Group Inc. commodities analysts said in a May 7 report, the same day weak U.S. jobs figures added to the case for more stimulus. The risk for bulls -- and anyone betting on buoyant returns from stocks and bonds -- is that the surge in raw materials feeds through to broader measures of inflation and eventually forces central banks to tighten.The iron ore sector “is very, very hot,” Vivek Dhar, commodities analyst at Commonwealth Bank of Australia, said in Bloomberg Television interview. “Supply is still not able to meet that strong demand.”Iron ore futures in Singapore jumped to a record above $226 a ton, extending this year’s gain to about 40%. Contracts in Dalian climbed by the daily limit when the market opened. Raw materials producers led gains in the MSCI Asia Pacific Index of regional shares, while Australia’s benchmark equity index was trading near an all-time high. Iron ore is the country’s biggest export earner.Copper, often viewed as a barometer of the global economy’s health, rose as much as 2.1% to a record $10,639 a metric ton on the London Metal Exchange.Copper remains a favorite long wager in the commodities complex, as “massive green demand is set to clash with a completely unprepared supply side,” Goldman Sachs analysts led by Sabine Schels wrote. They said the metal may rise to $11,000 a ton in 12 months and to $14,000 in 2024.“The supply side has been overshadowed somewhat recently with this spike in prices and stimulus projects talking about electric vehicle demand and decarbonization,” Sam Spring, CEO of Kincora Copper Ltd., an exploration company, said in a phone interview. “Before Covid and the spike in the copper price, you already had the industry struggling to keep supply flat. Investment from the last commodity cycle had peaked and not many new projects had been kicked off post 2015-16.”The iron-ore boom comes as China’s steelmakers keep output rates above 1 billion tons a year, despite a swath of production curbs aimed at reducing carbon emissions and reining in supply. Those measures have boosted steel prices and profitability at mills, allowing them to better accommodate higher iron ore costs and potentially front-load production ahead of more environmental restrictions.Steelmakers in the rest of the world, such as ArcelorMittal SA, are also enjoying a boom as demand bounces back from pandemic lows.“There is a chance that ex-China demand can come back to such an extent that we still see steel demand pick up globally and that will see iron ore demand remain at these elevated levels,” CBA’s Dhar said.Traders will be watching closely for how China responds. Shipmakers and household-goods manufacturers will eventually be unable to withstand elevated steel prices, the country’s state-run Xinhua News Agency reported on Sunday, citing an analysis from the China Iron & Steel Association. The report said it would be difficult for steel to continue rallying.The government has scheduled nationwide inspections on steel-capacity cuts, with the National Development and Reform Commission calling on the state asset regulator and provincial level working groups to complete self-checks by May 15. Authorities will conduct on-site inspections in June and July, according to a statement Monday.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
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