Iron ore price rally built on China hope, not fundamentals

The race by Tesla, Samsung and other technology giants to secure supplies of lithium is creating a unique chance for two global mining superpowers to reap more value from their natural resources.

President Xi Jinping wants the nation’s 500 electric car makers to be magnets for ancillary industries as he pushes to build a manufacturing superpower by 2025.

While geopolitical concerns have been the prime driver for most commodity markets recently, iron ore has been a standout, trading largely on traditional fundamentals.

The 17 so-called “rare earth metals” play strong supporting roles in many of the consumer electronics we enjoy on a daily basis, from our TVs to smartphones.

Gold premiums in top consumer China rose this week as investors bought the metal as a safe-haven due to rising trade tensions with the United States.

Once every decade or so, the world goes through a collective freak-out about rare earths.

Benchmark copper prices on the London Metal Exchange, trading at around $5,850 a tonne, have tumbled nearly 9% this month.

Central banks around the globe have been on a gold buying spree this year, with Russia and China, leading the pack.

China is willing to meet reasonable demand for rare earths from other countries, but it would be unacceptable that countries using Chinese rare earths to manufacture products would turn around and suppress China.