China's Big Policy Meeting Provided Limited Stimulus To Bulls in Commodities Such As Copper

The most high-profile political event in China this year has given little encouragement to commodity bulls, who are hoping for a boost to demand in the world's biggest raw materials market.
The National People's Congress, which concluded in Beijing on Monday, failed to deliver a rally in the prices of key commodities such as iron ore and copper, illustrating the mismatch between Beijing's ambitious growth targets and the market's lack of confidence in its plans to achieve them.
Growth of 5% this year may require fiscal stimulus, not just measures announced by policymakers. On the bright side, if the Chinese government is forced to invest more in energy - and metal-intensive infrastructure, this could spur better returns on commodity investments.
"The ultimate question will be whether policymakers are willing to defend China's economic growth target of around 5 per cent this year," Vivek Dhar, an analyst at Commonwealth Bank of Australia, said in a note. "We think this target will be challenging, but if growth falls short of policymakers' downside expectations, this could open the door to more infrastructure-related stimulus."
The policy's focus on getting companies to upgrade industrial equipment and households to replace older cars and appliances on a more regular basis should help metal consumption, especially if it boosts demand for cooled electric vehicles and accelerates the expansion of electric vehicles as a share of the fleet.
But the biggest risk remains the crisis-battered housing market, meaning that additional private or government spending may only offset the collapse in housing demand.
The Chinese government's long-term bet is that real estate can be replaced by new drivers of demand: electric vehicles, clean energy, and high-tech manufacturing - a change that, over time, could fundamentally alter its approach to raw materials markets and focus policymaking more directly on greener feedstocks.
"There may be little support for demand for commodities such as oil, steel and iron ore," ANZ Banking Group Holdings LTD said in a report. "Instead, metals and key minerals, as well as cleaner fuels such as natural gas, will be highly sought after."
But in the short term, concerns about economic growth have cemented the importance of cheap and reliable electricity. That means sticking with what you know, which for China is fossil fuels, especially coal.
The government has set a relatively modest target of reducing energy intensity by 2.5 per cent this year. Although China leads the world in renewable energy construction, the government continues to promote the role of coal in the economy. An official with the National Coal Association said that while China is rapidly approaching the peak of coal consumption, the plateau in coal consumption may be prolonged.