COMMODITIES REVIEW: demand and supply divide

China’s commodity markets reflected a widening divide between industrial demand and global supply pressures this week, as copper remained elevated on mining disruptions, iron ore struggled against weak steel consumption, and crude oil climbed amid renewed Middle Eastern tensions. The divergence underscored China’s contrasting roles as the world’s dominant consumer of industrial raw materials and a major importer of energy, with domestic economic weakness weighing on some markets even as international supply disruptions pushed prices higher.

Copper remained a focal point after Chinese traders returned from the National Day holiday. The most-traded contract on the Shanghai Futures Exchange reached RMB 111,750 ($16,680) per tonne during October 14 trading, compared with RMB 111,120 ($16,577) on October 8, an increase of RMB 630, or 0.6%. Expectations of Chinese restocking and a strike at Chile’s Centinela mine supported prices, although elevated costs continued to constrain downstream purchasing. Meanwhile, U.S. tariff uncertainty has encouraged substantial copper stockpiling in American warehouses, distorting international trade flows and creating price differences between COMEX, London and Shanghai. 

Iron ore offered a contrasting picture of China’s industrial economy. The most-traded contract on the Dalian Commodity Exchange closed at RMB 682.5 ($102) per tonne on October 8, before recovering marginally to RMB 683 ($102) on October 12, a gain of RMB 0.5, or 0.1%. Only 6.9% of Chinese steelmakers were profitable at the end of September, according to Mysteel, limiting demand for imported ore despite expectations of post-holiday restocking. The weakness presents a challenge for major exporters Australia and Brazil, while anticipated increases in global supply threaten further pressure on prices. 

Energy markets moved in the opposite direction. ICE Brent crude settled at $106.06 per barrel on October 14, up $5.86, or 5.8%, from October 7. Attacks on Saudi infrastructure and threats to shipping through the Strait of Hormuz outweighed recovering Gulf exports. For China, higher import costs risk squeezing refinery margins and raising manufacturing expenses, while restrictions on Chinese refined-fuel exports could exacerbate shortages elsewhere in Asia. 

Overall, the week’s movements highlighted an uncomfortable combination for Beijing: subdued demand for traditional industrial inputs alongside rising costs for energy and strategically important metals. Investors will watch whether post-holiday industrial restocking develops into sustained demand, and whether Middle Eastern supply disruptions continue to outweigh China’s weak domestic consumption.