The coronavirus pandemic forced China to bring industrial activity to a halt earlier this year, but the country is revving its engines again — and global prices of metals are reflecting that renewed appetite for growth.
China consumes roughly half of the world’s industrial metals, according to analysts. As the country emerged from the worst of the pandemic in March, the Chinese government unleashed a program of enormous fiscal stimulus aimed at building bridges, roads, utilities, broadband and railroads across the country. As a result, the prices of iron ore, nickel, copper, zinc and other metals used to build infrastructure have surged in recent months.
Since late March, prices of iron ore — the key ingredient in steel — have risen more than 40%. Nickel, needed for stainless steel, and zinc, used to galvanize metal, are up more than 25%. Copper, which is used in wiring for power transmission, construction and car manufacturing, and has long been seen as a barometer for the world’s industrial economy, is also up around 35%.
“China, as usual, went the investment route and is massively investing in metals-intensive infrastructure,” said Caroline Bain, a commodities market analyst with Capital Economics in London. “So there’s been a very strong pick up in China’s demand for metals.”
Last month, China’s state railway operator announced plans to double the size of its high-speed rail network over the next 15 years. In July, investment from China’s state-owned enterprises, including giants such as China National Offshore Oil Corporation and China Mobile, surged by 14% compared with the prior year, according to Standard & Poor’s analysts. (Private companies, by comparison, bolstered investment by just 3%.)
In Guangdong, the country’s most populous province, regional officials plan to spend some 700 billion yuan — about $100 billion — this year on public medical facilities, 5G networking and transportation infrastructure.
In February, the coronavirus outbreak prompted a lockdown of much of the country’s economy, the second largest in the world after that of the United States. From January to March, China’s economy contracted by 6.8%, the first decline the country has acknowledged in roughly half a century. Industrial activity stopped, causing metal prices to plunge. Copper and aluminum prices all dove roughly 20% in that period, while iron ore fell about 15%. The sudden pause in demand from such a big buyer immediately strained several countries that have built large parts of their economy around digging ore out of the ground and shipping it to China.
Australia’s exports to China — mostly iron ore and coal — tumbled roughly 20%, as the country fell into its first recession in nearly 30 years. Metal exports from Brazil, Chile and Peru also slumped, driven by cratering demand from China and declines in mining production, but also because miners were forced to halt operations as the coronavirus spread locally. The share prices of global mining giants, which get large portions of their revenue from China, cratered. In local currency terms, Vale in Brazil and the Anglo-Australian giant Rio Tinto both tumbled roughly 40% from January to March.
But the response of the authoritarian government in China — its state-led model that gives Beijing significant influence over the direction of the economy — was enormous, helping China post one of the fastest recoveries of any of the world’s largest economies in recent months.
Goldman Sachs’s estimates of Chinese budget deficits — a measure that includes both official budget deficit numbers and a variety of off-balance sheet government support that is common in China — ballooned to 20% of gross domestic product in the first half of 2020 from about 10% at the end of 2019, as the country pumped money into the economy.
Recent economic reports from China show where that government money has flowed. August data on industrial production revealed 5.6% growth over the same month last year, firmly establishing a V-shaped recovery for the sector. Industrial production in sectors tied to infrastructure, such as cement, steel and iron, all posted strong gains. Other official data on investment showed growth in utilities, road and rail construction.
Economists at the Organization for Economic Cooperation and Development expect that China’s GDP will actually grow by 1.8% this year, making it the only member of the Group of 20 nations that will not suffer a recession this year. That’s the best expected performance of any of the countries the organization tracked in its latest economic update.
“The recovery in GDP is much faster and stronger than elsewhere,” said Bain of Capital Economics.
That’s good news not only for metals markets, but could also herald better times for the global economy. Analysts have studied the prices of some metals as a leading indicator of global economic growth, even referring to copper as “Dr. Copper” because of its supposed ability to predict the direction of the economy as well as any economist with a doctorate.
“People’s perception of the economy is how weakened it is, yet all the industrial metals are telling you a very different story,” said Chris Verrone, an analyst and partner at Strategas Research in New York. “We think copper is the market trying to tell us that the economy is stronger than we expect.”
OTTAWA – The federal government is expected to boost the minimum hourly wage that must be paid to temporary foreign workers in the high-wage stream as a way to encourage employers to hire more Canadian staff.
Under the current program’s high-wage labour market impact assessment (LMIA) stream, an employer must pay at least the median income in their province to qualify for a permit. A government official, who The Canadian Press is not naming because they are not authorized to speak publicly about the change, said Employment Minister Randy Boissonnault will announce Tuesday that the threshold will increase to 20 per cent above the provincial median hourly wage.
The change is scheduled to come into force on Nov. 8.
As with previous changes to the Temporary Foreign Worker program, the government’s goal is to encourage employers to hire more Canadian workers. The Liberal government has faced criticism for increasing the number of temporary residents allowed into Canada, which many have linked to housing shortages and a higher cost of living.
The program has also come under fire for allegations of mistreatment of workers.
A LMIA is required for an employer to hire a temporary foreign worker, and is used to demonstrate there aren’t enough Canadian workers to fill the positions they are filling.
In Ontario, the median hourly wage is $28.39 for the high-wage bracket, so once the change takes effect an employer will need to pay at least $34.07 per hour.
The government official estimates this change will affect up to 34,000 workers under the LMIA high-wage stream. Existing work permits will not be affected, but the official said the planned change will affect their renewals.
According to public data from Immigration, Refugees and Citizenship Canada, 183,820 temporary foreign worker permits became effective in 2023. That was up from 98,025 in 2019 — an 88 per cent increase.
The upcoming change is the latest in a series of moves to tighten eligibility rules in order to limit temporary residents, including international students and foreign workers. Those changes include imposing caps on the percentage of low-wage foreign workers in some sectors and ending permits in metropolitan areas with high unemployment rates.
Temporary foreign workers in the agriculture sector are not affected by past rule changes.
This report by The Canadian Press was first published Oct. 21, 2024.
OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.
However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.
The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.
Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.
The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.
The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.
This report by The Canadian Press was first published Oct. 17, 2024.
OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.
In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.
The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.
Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.
In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.
It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.
This report by The Canadian Press was first published Oct 16, 2024.
