The End of the China-Driven Metals ‘Super Cycle’ Predicted by Jefferies

The China-Driven Metals ‘Super Cycle’ Is Over, Jefferies Says

In a recent note, Jeffries, a global investment banking firm, has stated that the days when China fueled demand for metals like copper, aluminum, and iron ore are over. Analysts led by Christopher Rafemina believe that long-term demand will now be dominated by the United States and Europe, as China faces declining populations and geopolitical challenges.

“For demand over the next decade, China is likely to be more of a headwind than a tailwind,” said Rafemina. He explained that the cycle was just beginning, indicating a shift in the global metals market.

China, which has become Asia’s largest economy, has spent the past 20 to 30 years aggressively building infrastructure and supporting the metals market. However, the country’s economic recovery has been slow since the coronavirus pandemic. As China shifts its focus to a domestic economy that is more service-oriented, it may lack the strength needed to boost global demand.

This change in dynamics could have significant implications for the metals industry, as China has been a major driver of demand for these commodities. The country’s rapid growth and industrialization have led to a surge in metal consumption, supporting prices and creating what was known as the “super cycle.”

The super cycle refers to an extended period of high demand and rising prices for metals, driven by China’s infrastructure development and urbanization. However, with China’s economic landscape shifting and its population declining, the super cycle seems to be coming to an end.

The implications of this shift are not limited to the metals market alone. It could have broader implications for global trade and economic dynamics. As China’s influence wanes, the United States and Europe are expected to take the lead in driving long-term demand for metals.

While this shift may present challenges for the metals industry, it also opens up new opportunities for other regions to step in and fill the void left by China. As the global economy continues to evolve, it will be crucial for market participants to adapt and navigate these changing dynamics.

Original title: The China-Driven Metals ‘Super Cycle’ Is Over, Jefferies Says (excerpt)

Source: Bloomberg (link: https://www.bloomberg.com/news/articles/2023-06-23/the-china-driven-metals-super-cycle-is-over-jefferies-says)

What are the potential implications and opportunities for mining companies and metal producers in response to the shift in demand dynamics from China to the United States and Europe

Ays Rafemina.

China has been the main driver of the metals “super cycle” for the past two decades, with its rapid industrialization and urbanization fueling strong demand for construction materials like copper, aluminum, and iron ore. However, as China’s economy matures and its population growth slows down, the country’s demand for these metals is expected to decline.

In addition to demographic changes, China also faces geopolitical challenges, particularly in its trade relations with the United States. The ongoing trade tensions between the two countries have led to increased tariffs and restrictions on imports, impacting China’s ability to drive global demand for metals.

According to Rafemina, the shift in demand dynamics will benefit the United States and Europe. The United States, in particular, is expected to see increased demand for metals due to its infrastructure plans and focus on renewable energy. Europe is also likely to drive demand, thanks to its transition towards a greener economy.

While the “super cycle” driven by China may be coming to an end, Rafemina does note that there will still be short-term fluctuations in metal prices due to supply and demand imbalances. However, the long-term trend is expected to be dominated by the United States and Europe.

This shift in demand dynamics could have significant implications for global metal markets and supply chains. Mining companies and metal producers may need to adjust their strategies to meet the changing demand patterns. It could also present opportunities for investment in the United States and Europe’s metal industries.

Overall, Jeffries’ note suggests that the era of China-driven metal demand is over, and the focus will now shift to the United States and Europe. As China faces declining populations and geopolitical challenges, the long-term demand for metals will be driven by other regions.