Industrial metals are well on their way to being among the top performers of 2020, supported by red hot demand from China and global supply concerns.

As of today, the MSCI Industrial Metals Index—which tracks the price of copper, nickel, aluminum and more—was up 21.4% year-to-date, just below the index of precious metals, up 21.9%. The broader S&P GSCI, which measures metals as well as agricultural and energy-related commodities, was underwater by nearly 10%.

industrial metals poised to outperform in 2020
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As I discussed last week, copper prices have been on a tear this year thanks not only to the economic strength of China, the metal’s biggest consumer, but also because of its essential role in nascent technologies such as electric vehicles (EVs) and renewable green energy.

The very hottest major commodity, however, has been iron ore. Used to make steel, the metal has increased nearly 70% in 2020, with iron futures trading on the Singapore Exchange topping $155 per metric ton today for the first time since the contract came online in 2013.

iron ore futures jump above $150 a ton on china demand outlook and growing supply risks
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At the very heart of this rally is rapidly strengthening factory activity around the globe. In November, a number of countries’ manufacturing sectors were in expansion mode, according to the monthly purchasing manager’s index (PMI), which is a leading indicator for demand.

But the big standout is China, the only major economy to see a robust recovery following the pullback that was triggered by the coronavirus pandemic.

The U.S., by comparison, is rebounding nicely, but it still has a long way to go before it reaches pre-pandemic levels. As of November, the number of jobs in the country was still below the February peak by nearly 10 million.