China’s Stimulus Expected to Strengthen Base Metals and Iron Ore Prices in the Short Term – Citi

Citi analysts have adopted a positive short-term outlook for base metals and iron ore prices, driven by optimism regarding increased stimulus measures from China, the world’s largest consumer. However, their longer-term perspective is less favorable.

The firm has raised its three-month price targets for copper, aluminum, nickel, zinc, lead, tin, and iron ore, maintaining its long-term targets unchanged. In a recent note, the analysts expressed that they anticipate a temporary increase in prices for these metals in the coming weeks, spurred by China’s policy momentum. Nonetheless, they expect this upswing to diminish as concerns regarding U.S. election dynamics, recession risks, and market reactions to price increases gain prominence.

Citi emphasized that the success of this forecast largely hinges on China’s ability to effectively implement stimulus measures, as well as developments related to U.S. interest rates and the upcoming 2024 election.

The brokerage is particularly optimistic about iron ore, raising its three-month price target to $120 per ton from $85, largely due to the significant influence of Chinese stimulus on the market. Copper is also expected to benefit from similar trends, with the three-month target adjusted to $10,500 per ton, up from $9,500.

However, Citi has expressed caution regarding the longer-term outlook, pointing to uncertainties surrounding U.S. interest rates and potential recession risks. The upcoming U.S. election introduces further uncertainty; a potential victory for Donald Trump could significantly impact base metal prices, given his predominantly anti-China stance.