An oil pump at sunset in Daqing, Heilongjiang province, China, on July 13, 2006.
Lucas Schifres | Getty Images
China’s demand for major commodities continues to grow at a robust rate, according to Goldman Sachs. The investment bank reports that China’s demand for copper has risen by 8% year on year, while appetite for iron ore and oil has increased by 7% and 6% respectively, surpassing Goldman Sachs’ full-year expectations.
The Goldman report attributes this strong demand to the green economy, grid and property completions in China. Despite the struggles of the property sector, the green economy has exhibited significant strength, resulting in a surge in demand for metals like copper.
In particular, Goldman’s economists point to China’s onshore solar installations, which have reached a level equivalent to all previous years’ installations by 2023.
Molten copper flowing into molds at a smelting plant in Wuzhou, China.
He Huawen | Visual China Group | Getty Images
According to a report by the Global Energy Monitor, China’s operating solar capacity stands at 228 GW, which is more than the rest of the world combined. The country is also on track to double its wind and solar capacity five years ahead of its 2030 goals.
Data collected by Goldman Sachs reveals that China’s green copper demand increased by 71% in July compared to the previous year. The surge in demand is largely driven by the growing demand for renewable energy, particularly solar energy.
Additionally, China’s recovery in the manufacturing sector has led to increased demand for base metals like aluminum. The country’s industrial production grew by 4.5% in August compared to the previous year.
Goldman Sachs predicts that the demand growth for these metals will continue. The investment bank forecasts a supportive underpinning for onshore aluminum and copper demand in the coming year due to the current positive drivers.
Although China’s oil demand has been rising due to a rapid recovery in oil-intensive sectors like transportation, Goldman Sachs analysts anticipate a slowdown in growth next year.
Commodities as a ‘better bet?’
Despite a faltering macroeconomic growth story in China, the surge in commodities is evident. Hao Hong, chief economist at Grow Investment, notes that commodities are responding positively to the People’s Bank of China’s monetary expansion, while the Chinese stock market is struggling. Traders in the Chinese market see commodities as a better investment for the marginal improvement in the real economy.
The People’s Bank of China announced its intention to boost macro policy adjustments to maintain stable credit expansion and liquidity.
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