China Breathes Life Back Into Commodity Markets Link Here
Growing signs that China is emerging from a slowdown are breathing life back into the commodity markets and sending metals higher.
Copper has climbed this month to trade near its highest in eight weeks, and tin is close to the strongest in four months. Demand for other commodities rose as well, with China receiving record imports of iron ore that's used primarily to make steel. Even lesser traded commodities like platinum and palladium rallied on the optimism.
The recent buying puts a halt to the slide in the first few months of the year when worries gripped investors over the health of China, the world's largest consumer of metals. China's economic picture has started to turn up recently, which was confirmed by data Friday showing industrial production accelerated last month, a day after reports showed exports and imports rose more quickly than expected in July.
"The import data has definitely added some optimism to the market which has been pretty depressed, and will likely boost commodity prices in the near term," said Wan Ling, senior analyst at metals and mining consultancy CRU Group.
Improving prospects for the U.S. and European economies is also improving the outlook for manufacturing, though energy markets and agricultural goods have yet to receive the price gains like metals. Crude-oil futures have fallen for five consecutive sessions through Thursday.
Copper on the Comex division of the New York Mercantile Exchange was recently at $3.3040 a pound, the highest since June 7, for the most actively traded contract, for September delivery. A day earlier, copper prices shot up 3.1% after trade data showed China's July copper imports rose. China consumes more than 40% of the global supply of the commodity.
Still, the woes are far from over and the metal is still down for the year, as other data point to an uneven economic recovery. China's Producer Price Index, which covers factory gate prices in sectors like steel and cement, fell 2.3% in July, indicating manufacturing isn't out of its lull.
Helen Lau, senior analyst at brokerage UOB Kay Hian in Hong Kong, said strength in July's imports of commodities was partly due to warehouses restocking after months of allowing supplies to run lower.
A Shanghai-based trader at a local commodity house said he expects copper imports to come down from levels seen in June and July as appetite may be tempered due to a buildup of the imports on the back of steady but modest economic growth.
The backdrop to the metals revival in China is that top government officials, including Premier Li Keqiang and central bank governor Zhou Xiaochuan, have publicly repeated Beijing's pledge to maintain steady growth. That's while pushing ahead with long-term reforms to move the economy to rely more on consumer spending and away from government infrastructure projects that typically are heavy users of metals.
The commodities were also buoyed Friday after data showed Chinese consumer price gains stayed low in July, raising expectations for further monetary easing that could help fuel the economic recovery.
"Inflation is not a big concern," said Shen Jianguang, economist at Mizuho Securities. "But corporations are still under a lot of pressure and there should be a cut in interest rates and bank reserve requirements."
The optimism is also spilling over into the equity markets, with large Australian miners BHP Billiton Ltd. and Rio Tinto Ltd. surging 14.6% and 15.2% since the start of July. That's outperformed the country's benchmark S&P/ASX 200 index, which has risen just 5.6% over the same period.
Any expressed market opinion is my own and is not to be taken as financial advice
Why this desperate hope that China can save itself from imploding by switching from an export driven economy [in the face of collapsing gobal demand for its products] to a consumption based economy [ where no one in China wants to spend in excess because they have no social safety net] Why? Because china is the last leg on the wobbly stool of Australlian prosperity.
A Cambridge educated engineer, with a particular interest in the interaction of corporate governance, corporate responsibility and sustainability. Ian Dunlop was formerly a senior international oil, gas and coal industry executive. He chaired the Australian Coal Association in 1987-88, chaired the Australian Greenhouse Office Experts Group on Emissions Trading from 1998-2000 and was CEO of the Australian Institute of Company Directors from 1997-2001.
Chinese industrial production increased by 9.7% in July YoY indicating higher growth in the 2nd half of 2013.
Alot of infrastructure projects are now starting construction which was delayed during the change over of Government leaders. Industry is also gearing up and restocking for the construction of 10 completely new cities in china over the next few years.
I think we have seen the bottom of resources prices for now. The question is now how high will prices rise with a strengthening USA, improving Japan and even data out of Europe is not as disastrous as it seemed. Combined with China picking up speed what effect will the combination already do to a tight resource market where new supply is limited.
The optimism is also spilling over into the equity markets, with large Australian miners BHP Billiton Ltd. and Rio Tinto Ltd. surging 14.6% and 15.2% since the start of July. That's outperformed the country's benchmark S&P/ASX 200 index, which has risen just 5.6% over the same period.
Well done Timmy,wish I had bought at the same time.
Brian S
10 Aug 2013, 10:55 AM
Why this desperate hope that China can save itself from imploding by switching from an export driven economy [in the face of collapsing gobal demand for its products] to a consumption based economy [ where no one in China wants to spend in excess because they have no social safety net] Why? Because china is the last leg on the wobbly stool of Australlian prosperity.
A Cambridge educated engineer, with a particular interest in the interaction of corporate governance, corporate responsibility and sustainability. Ian Dunlop was formerly a senior international oil, gas and coal industry executive. He chaired the Australian Coal Association in 1987-88, chaired the Australian Greenhouse Office Experts Group on Emissions Trading from 1998-2000 and was CEO of the Australian Institute of Company Directors from 1997-2001.
I have listened to folk like Ian who predict gloomier than gloomy outlooks for the last few decades. Their predictions never eventuate, because they fail to consider the resourcefulness and adaptability of their fellow human beings. The truth is always more boring, more up a bit --down a bit, but you don't get on the international talk circuit without a bit of drama in your tale.
China is not going to implode, it will hit rough patches for sure but it is one of the longest standing civilizations in the world. Confucius was teaching in Chinese universities when Europeans were in the caves. Do you really believe the Europe and and the Americans will emerge from this downturn free of their addiction to cheap goods from China????
Definition of a doom and gloomer from 1993 The last camp is made up of the doom-and-gloomers. Their slogan is "it's the end of the world as we know it". Right now they are convinced that debt is the evil responsible for all our economic woes and must be eliminated at all cost. Many doom-and-gloomers believe that unprecedented debt levels mean that we are on the precipice of a worse crisis than the Great Depression. The doom-and-gloomers hang on the latest series of negative economic data.
Well down Timmy,wish I had bought at the same time. I have listened to folk like Ian who predict gloomier than gloomy outlooks for the last few decades. Their predictions never eventuate, because they fail to consider the resourcefulness and adaptability of their fellow human beings. The truth is always more boring, more up a bit --down a bit, but you don't get on the international talk circuit without a bit of drama in your tale.
China is not going to implode, it will hit rough patches for sure but it is one of the longest standing civilizations in the world. Confucius was teaching in Chinese universities when Europeans were in the caves. Do you really believe the Europe and and the Americans will emerge from this downturn free of their addiction to cheap goods from China????
Yet Chinese steel companies continue to post losses. A fact the bulls continue to ignore.
mate you have been on and on about this stuff for way too long - I just cannot take you seriously anymore. You have always got some doom and gloom to sell and it never eventuates. Some day maybe, but Perthite right now though, you are a gloomer outta cycle and it is very hard not to laugh at your pathetic attempts to spin a gloomy tale amid the abundance of economic recovery news.
Definition of a doom and gloomer from 1993 The last camp is made up of the doom-and-gloomers. Their slogan is "it's the end of the world as we know it". Right now they are convinced that debt is the evil responsible for all our economic woes and must be eliminated at all cost. Many doom-and-gloomers believe that unprecedented debt levels mean that we are on the precipice of a worse crisis than the Great Depression. The doom-and-gloomers hang on the latest series of negative economic data.
Why this desperate hope that China can save itself from imploding by switching from an export driven economy [in the face of collapsing gobal demand for its products] to a consumption based economy [ where no one in China wants to spend in excess because they have no social safety net] Why? Because china is the last leg on the wobbly stool of Australlian prosperity.
A Cambridge educated engineer, with a particular interest in the interaction of corporate governance, corporate responsibility and sustainability. Ian Dunlop was formerly a senior international oil, gas and coal industry executive. He chaired the Australian Coal Association in 1987-88, chaired the Australian Greenhouse Office Experts Group on Emissions Trading from 1998-2000 and was CEO of the Australian Institute of Company Directors from 1997-2001.
Well made points, but I keep asking myself whether half the worlds population (centred in Asia and the subcontinent) who are industrious, clever, and have the same dreams and ambitions that we have, will be happy to live without the things that we take for granted - and everytime I answer myself NO.
They need raw materials, and where will they get those raw materials from?
Any expressed market opinion is my own and is not to be taken as financial advice
mate you have been on and on about this stuff for way too long - I just cannot take you seriously anymore. You have always got some doom and gloom to sell and it never eventuates. Some day maybe, but Perthite right now though, you are a gloomer outta cycle and it is very hard not to laugh at your pathetic attempts to spin a gloomy tale amid the abundance of economic recovery news.
Yet the amount of people employed in WA is now trending lower. Correct call.
Fyi the job losses have already started. Better stop those meds. Reality... thud.
peter fraser
10 Aug 2013, 04:26 PM
Well made points, but I keep asking myself whether half the worlds population (centred in Asia and the subcontinent) who are industrious, clever, and have the same dreams and ambitions that we have, will be happy to live without the things that we take for granted - and everytime I answer myself NO.
They need raw materials, and where will they get those raw materials from?
All well and good to look for green shoots.
The fact remains that the big miners are determined to mine more and spend less.
That is the reality we face right now. Billions in huge cuts.
Well made points, but I keep asking myself whether half the worlds population (centred in Asia and the subcontinent) who are industrious, clever, and have the same dreams and ambitions that we have, will be happy to live without the things that we take for granted - and everytime I answer myself NO.
They need raw materials, and where will they get those raw materials from?
They will get them wherever they are cheapest I suspect. Who would guess that Indonesia would become the world's largest coal exporter 20 years ago? I know that Africa and South America seem like political basket cases right now, but who is to say that that won't change with changing ambitions. It's not just Asia who desires the first world lifestyle.
Who would guess that Indonesia would become the world's largest coal exporter 20 years ago?
Once again seeing as you never backed it up last time you said it...evidence.
CURRENT evidence, not 2011 figures.
Ignore posts by The Whole Truth · View Post · End Ignoring The forum fuckwit goes RRRAAARRRGGHHhhh - But not a fuck was given..................by anyone.
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