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Commodity markets have rebounded strongly from the peak of the pandemic crisis. Part of the support has come from the real estate sector, where activity is even stronger than before the crisis began. In the short-term, this should boost demand for industrial metals. Strategists at ANZ Bank see iron ore and copper benefiting the most. 

Key quotes

“As lockdown measures ease, consumers around the globe appear to be jumping back into the real estate market. Housing transactions have picked up strongly on the back of pent-up demand. China has been the centre of strength, but the US and Europe have also improved. Housing also appears to have developed some safe-haven status.”

“Real estate is an important sector for commodities, accounting for as much as 40% of total consumption in mainly industrial metal markets. It also has important implications for downstream demand, as the wealth effect supports consumer demand for items such as cars and home appliances.”

“We see steel, iron ore and copper benefiting the most. Steel has already seen strong demand in China so far this year. With property investment up 11.6% YoY in July, steel production has been buoyant. Output is up 5.2% to 608.7mt in the first seven months of the year. Combined with expected growth in fixed-asset investment, we now expect China’s annual steel production to exceed 1B tonnes this year. That would amount to a growth rate of 4.8%, up from our original forecast of 1.5% growth at the start of the year.”

“The ability of the property sector to remain buoyant relies on employment and consumer confidence. If business failures, high unemployment, insolvency or disrupted financial markets continue, they will weaken demand for property in the medium to long term. For the moment, though, we believe the robust real estate markets (especially in China) should support commodity markets.”


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