Australian Mining Companies Are Thriving Due to Hopes of Increased Demand from China

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Monday sees an increase in the value of shares for some of Australia’s most notable mining companies. 

The rise results from possibilities for better commodity demand prospects following China’s indication to lessen pandemic restrictions and its decision to end its property-sector controller program.

BHP Group Ltd., the world’s largest mining company by market value, saw its stock prices rise 5.0% to 44.20 Australian dollars (US$29.65) a share recently. The company is a significant producer of steel-making commodities, such as iron ore and metallurgical coal.

Rival Rio Tinto Ltd., the leading iron-ore producer and No. 2 miner by market value, increased 4.3% to A$107.03 a share. 

Both stocks are currently at their highest point since early summer. Other miners, such as Fortescue Metals Group Ltd. and South32 Ltd., have also experienced a surge in recent weeks.

On Friday, China’s central bank and top banking regulator issued a notice with various measures to banks and officials involved in policy-making. These aim to increase housing demand and production within the country.

China’s steel and other resources demand primarily come from the construction industry. Commonwealth Bank of Australia analyst Vivek Dhar says that the sector accounts for around 30% of China’s steel consumption and 20%-30% of aluminium, zinc, and copper.

Nonetheless, it’s difficult to see how much demand there will be for commodities after prices decreased significantly in China’s housing market recently, he said Monday in a note to clients.

With homebuyer and creditor confidence so eroded, it’s hard to gauge how quickly China’s property sector can recover, even if China’s Covid-zero policy has been relaxed,” said Mr Dhar.

We’d likely need to see a more meaningful relaxation of China’s Covid-zero policy and a greater tolerance to live with Covid-19 than to eliminate it,” he added.

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