May 22, 2020 / 10:01 AM / 12 days ago

Chinese commodities slump as Beijing ditches growth target

SHANGHAI, May 22 (Reuters) - China’s commodities markets fell after it said it would drop its annual growth target and impose national security laws in Hong Kong at this year’s meeting of parliament.

Most metals, agriculture and energy contracts on the Shanghai Futures Exchange, Dalian Commodity Exchange and Zhengzhou Commodity Exchange closed lower on Friday.

A Shenzhen-based metals trader said while China’s decision to drop its annual growth target added to the market’s bearish tone, commodity prices had already begun to fall after China said it would propose national security legislation for Hong Kong at its annual parliament meeting.

“The market is more worried that such a move by China will aggravate tensions between China and the U.S. and other countries, and it will lead to greater economic uncertainty.”

Lingering concerns over China’s crude oil consumption as it maintains efforts to curb the coronavirus also hit prices.

“Weak oil prices today were related to the no growth target, but as a whole, the recovery for crude oil has not been good,” said Xi Jiarui, crude oil analyst at JLC Consulting.

“Domestic supply exceeds demand. The market is still sluggish because of the epidemic situation.”

However, some contracts like Dalian’s soybean and soymeal futures closed higher.

Dalian’s iron ore futures also made gains, supported by strong domestic demand, tight supply and as China pledged to boost fiscal support for its economy.

“The entire commodities market is weak as the government report did not set a gross domestic product target, so agriculture products are also on the weak side,” said Lin Qing, Junrui Futures agriculture analyst.

Products such as soymeal could see some support, as the deterioration in U.S.-China relations stoked supply concerns, she added.

Reporting by Emily Chow in Shanghai; Additional reporting by Mai Nguyen in Singapore Editing by Alexander Smith

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