China’s Covid Zero policy is an anchor on product prices

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(Bloomberg) – Prices of industrial goods in China have recovered somewhat after the central bank issued a roadmap for opening Shanghai and the central bank cut interest rates on long-term loans.

Friday’s monetary easing was aimed specifically at the disrupted housing market, which will help meet demand for the metal. But it is still difficult for the stimulus to gain much traction if large parts of the economy – including, now, Beijing – face the threat of occupying and counting Shanghai for two months.

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In that vein, Macquarie Group analyst Serafino Capoferi told an iron ore conference in Singapore last week that he did not expect the Chinese stimulus to give a big boost to product prices until next year.

As long as the government survives with Covid Zero, raw material markets are unlikely to move much forward, especially if China’s policy helps keep a lid on electricity prices, which greatly pressures the cost of producing goods. The consensus seems to be that President Xi Jinping will not change course until the Communist Party comes to power in an unprecedented third term in Congress this fall.

Meanwhile, Bloomberg Intelligence predicts that China’s slower growth will affect energy demand, weaken oil imports and limit international prices to $ 110 a barrel. It expects marine gas imports to fall further in May amid restrictions on industrial activity.

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Event today

(Beijing all the time unless otherwise shown.)

Nothing major determined

Today’s chart

China’s soybean consumption is about the same as the entire US crop, and the country has to import about 85% of its demand. Food prices have doubled in the last two years. With the global food crisis looming, soybeans could pose the biggest inflation risk for a nation dependent on foreign suppliers for many of its major crops.

Via wire

CTT downgrades Sinopec in the wake of lockdown, PetroChina-H China is counting on infrastructure spending to grow: report

Weeks ahead

Tuesday, May 24

Nothing major determined

Wednesday, May 25th

Report by IEA and Tsinghua University and webinar on China’s carbon market, 08:30 Paris

Thursday 26 May

Bloomberg China Economic Survey for May, 10:00 Thursday: USDA Weekly Crop Export Sales, 08:30 EST

Friday, May 27

China Industrial Profit for April, 09:30 China Weekly Iron Ore Port Stock Shanghai Exchange Weekly Product List, ~ 15: 30

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