China’s economy is recovering. Accommodating monetary policy is being augmented by expanding the fiscal deficit which might include tax cuts. Construction is beginning to recover since total surplus inventory has fallen to the key seven-month level. The NDRC has released 25 infrastructure projects most of which were frozen earlier this year because cases of corruption were detected. Both wages and consumer spending continue to increase. In some key manufacturing sectors inventories have been reduced. Many private sector companies are now managing cash flow appropriately so are improving profitability. Investment will follow in 2017. Against this background real consumption of metals has begun recovering and will gather pace in 2017.

Eoin Treacy's view

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One of the reasons China has been going through such a difficult time is because many of the markets it sends exports to have been in difficulty. The US credit crisis, the EU’s sovereign debt and banking crisis and the collapse of commodity prices all hit demand for China’s exports.   

Chinese producer prices have been rallying all year and broke to a new recovery high in September. Economic growth statistics have been improving in many of the country’s export markets and demand for additional infrastructure at home is revitalising demand for industrial commodities.

Copper has lagged the other metals but broke emphatically upwards earlier this month. It found support at $2.40 and bounced from above $2.55 today. A sustained move below $2.50 would be required to question medium-term recovery potential.