China’s Communist Party met last week to thrash out its 14th five-year plan. The plan specifies goals for economic development plus social and environmental targets. Economists at ANZ Bank expect to see demand for commodities remain strong. However, the composition of demand will change from that of the past five years. The goal to hit become carbon neutral by 2060 is the prime driver behind this transition.
Key quotes
“China’s transition to a low-carbon economy is expected to reshape commodities demand in coming years. Overall we see demand remaining strong, but the mix will shift as it pursues its goal to hit peak carbon emission by 2030 and become carbon neutral by 2060.”
“We expect a gradual shift in the energy mix away from fossil fuels, as the country balances economic growth and environmental goals, and we expect LNG to benefit the most. Demand for transport fuel will suffer, but greater emphasis on petrochemicals should see crude oil imports remain strong.”
“We see high value-added metals such as copper and nickel benefiting the most as China increases electrification of the auto sector powered by renewable energy. Steel demand is likely to remain relatively robust. However, continued use of electric arc furnaces will weigh on iron ore demand.”
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