Commodity Prices Threatened More By Tweets Than China's Economy

(Bloomberg) -- Political uncertainty in the developed world poses a bigger threat to industrial commodities markets than any destabilizing slowdown in top consumer China, according to the world largest copper miner.

“The United States political system, the British political system, and the Europeans are doing their best to maximize uncertainty in a way,” Oscar Landerretche, chairman of Chile's state-owned miner Codelco, said in an interview in Shanghai. “If global financial markets have a crisis, or the economy goes through a crisis because of a failure of public policy, that is going to absolutely in the end contaminate commodities markets.”

Copper's up 22 percent this year, advancing with other metals, as accelerating growth across the developed world combines with a demand rebound in China. Analysts from Goldman Sachs Group Inc. to hedge fund Shanghai Chaos Investment Group have flagged President Xi Jinping's efforts to deleverage the system and curb its commodities-intensive property sector as key headwinds.

“The Chinese economy is a powerful economy that has shown it can manage itself in a very grown-up way,” said Landerretche, a former economics professor at the University of Chile. He contrasted Western politicians “fighting with themselves over tweets” with China's focus on long-term strategy.

The Codelco chairman was speaking during Asia Copper Week, a series of events and gatherings hosted by Chile's copper industry with Chinese counterparts. Optimism on the metal's long-term prospects was still in evidence in Shanghai, with the outlook bolstered by forecasts of emerging long-term shortages. Landerretche has said copper returning to $10,000 a metric ton is possible. The price was at $6,760 in London on Friday.

The main risk for copper next year is an “overshooting of public policy” aimed at tackling debt in China, Ivan Arriagada, chief executive officer of another Chilean miner Antofagasta Plc, said in a separate interview in Shanghai on Thursday. But his assessment of China's prospects broadly chimed with Landerretche's. “All the signals are toward more confidence in their ability to manage monetary and fiscal policy, and not the other way around.”

To contact Bloomberg News staff for this story: Martin Ritchie in Shanghai at mritchie14@bloomberg.net.

To contact the editors responsible for this story: Jason Rogers at jrogers73@bloomberg.net, James Poole

©2017 Bloomberg L.P.

With assistance from Martin Ritchie