Welcome back to our weekly editorial on everything commodity and energy-related!

This week is all about China as the Politburo and PBoC have announced new (undefined) stimulus measures aimed at simultaneously countering tariffs from the Trump administration in 2025 and bolstering the economy, regaining confidence as China battles structural issues.

This naturally raises the question of how this will impact commodities. As the world’s largest importer of commodities by a significant margin, China’s injection of capital into its economy could provide a substantial boost. But which commodities should you focus on, and are there pockets within the market that won’t benefit from a stronger Chinese economy?

We have previously modeled Chinese demand for copper extensively, yielding excellent results. Over the past months, we’ve observed a normalization from the weak levels seen in spring 2024—copper stock levels have declined, consumption is regaining momentum, and global manufacturing data has picked up speed. This creates room for copper to advance further.

Moves in Chinese activity tend to correlate strongly with base metals like copper, iron ore, and steel. Thus, the straightforward way to gain exposure to the upcoming Chinese stimulus cycle is through metals, with copper being our preferred choice. However, the ultimate impact depends on how the stimulus package is structured.

The timing of the stimulus announcement is notable, coming shortly after Trump’s victory and his tariff threats. There is a significant chance the stimulus could primarily act as a “counterattack” to US tariffs. For instance, China could inject capital into the commodity markets, driving up buying activity and causing a temporary inflation shock—potentially complicating Trump’s economic policies. This scenario bodes well for commodities.

The alternative scenario involves a more traditional stimulus approach, such as direct cash transfers or QE via the stock market, which historically provides less support to commodities.

Chart 1.a: Copper stock levels have normalized