The federal government may have written off the chances of a snap-back for the economy, but this doesn't mean a V-shape recovery is off the table for all.
If anything, the sharp rebound is already unfolding for some miners with Citigroup noting a big rebound in demand for copper from China.
Australia is lucky to enjoy China's unrelenting love for our commodities as the Morrison government extended its six-month wage support programs yesterday till the end of 2020, if not beyond.
It's an admission that the government's initial expectations for a rapid reinflation of our COVID-19-stricken economy was way too optimistic.
Copper miners outperforming the ASX 200
At least our copper miners have something to cheer about with the OZ Minerals Limited (ASX: OZL) share price jumping 2.8% to a nine-year high of $13.34 during lunch time trade.
Its fellow copper producer isn't doing too badly too. The Sandfire Resources Ltd (ASX: SFR) share price climbed 0.5% to $5.57 when the S&P/ASX 200 Index (Index:^AXJO) tumbled 1.2% at the time of writing.
The preliminary read on Citigroup's China copper end-use tracker (CCET) jumped 5.5% year-on-year (y/y) for June – the highest growth rate since May 2018.
Chinese metal demand
"This is the second positive y/y growth print this year, following +2.5% y/y in May 2020, pointing to a 'V' shaped recovery in Chinese end-use copper demand, having bounced back from -28% y/y growth in February 2020 (the steepest monthly y/y decline on record)," said the broker.
"The construction, automotive, and electronics sectors have been particularly strong in recent months.
"The broad based nature of end use improvement in China means demand should be similarly strong for other metals."
These other metals include aluminium, zinc, nickel, silver and platinum group metals (PGMs). The data bodes well for other ASX miners too like the South32 Ltd (ASX: S32) share price and Alumina Limited (ASX: AWC) share price.
Australia's V-shape recovery dream
Given the strong recovery in key sectors of the Chinese economy, one has to wonder if Australia can follow a similar path out of the coronavirus shutdown.
Australia is a few months behind China as the Asian giant appeared to have contained the virus outbreak in Wuhan around March.
But it isn't realistic for us to think about the road to recovery when Victoria hasn't yet seen a turning point in COVID-19 cases. The state recorded 484 new cases in the last 24 hours – its highest daily toll since the pandemic.
New South Wales is also desperately trying to gain control as a small outbreak of the disease is threatening to snowball.
Perhaps it's all the more reason to be overweight on ASX miners as they aren't exposed to the local economy.
