Hoping for an end to China’s lockdowns, metal heads? Don’t count on it

The bogeyman for metals prices in 2022, which seemed like they would go haywire in the aftermath of major global producer Russia’s invasion of Ukraine, has been China’s strict Covid response.

Seemingly months and years behind the well vaccinated West, China’s leader Xi Jinping continues to use his strong control of the Communist Party to maintain a hard line on Covid and industry.

The lockdowns have hit coal country in China’s north, where Mysteel says four major coal basins producing thermal and coking coal from Northwest China to Shaanxi have been forced to shut down with sales to halt during lockdowns between October 11 and 14.

Press reports in Government media have expressed support for the Government’s hard line anti-Covid stance, unsurprisingly, ahead of the Communist Party National Congress starting this weekend.

“Once a large-scale Covid rebound is formed, the spread of the epidemic will inevitably have a serious impact on economic and social development, and the final cost will be higher and the loss will be greater,” The People’s Daily said in one of two straight editorials on the weekend, suggesting a change in direction could be at least months away.

Output restrictions have also been placed on steel mills in Hebei to reduce pollution between October 14 and 22, ANZ’s Gregorius Steven said in a note.

Iron ore futures have continued in a bearish direction, with Dalian futures for January deliver down 2.6% today to under US$100/t.

Nickel, aluminium and zinc prices were all down overnight, while copper was up slightly to US$7596/t.

Even better than expected credit growth data for September did not stimulate confidence in the steel complex.

Chinese banks issued net RMB2.47 trillion, in local currency in September, Capital Economics senior China economist Julian Evans-Pritchard said, more than one-third above Bloomberg’s RMB1.8t consensus forecast.

“Credit growth surprised to the upside last month, edging up thanks to official efforts to boost lending via policy banks,” Evans-Pritchard wrote.

“But wider appetite for borrowing still appears depressed, which will probably keep credit growth relatively subdued in the near-term.”

Big miners close down 0.5%

China exposed miners like BHP (ASX:BHP), Fortescue (ASX:FMG), Mineral Resources (ASX:MIN) and Lynas (ASX:LYC) all fell as the materials sector registered a 0.5% drop.

The highlights came from a smattering of coal plays, led by Coronado (ASX:CRN), which surged 8.01% on news it was considering a tie-up with America’s Peabody Energy.

That news had a lot of coal investors frothing at the prospect of realising value from their investments with prices for thermal coal still around record highs, with Stanmore (ASX:SMR) and Whitehaven (ASX:WHC) also flying.

In other commodities lithium developer Sayona Mining (ASX:SYA) and copper-gold miner OZ Minerals (ASX:OZL) were the standouts.

Monstars share prices today:

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