China cools on the commodity front

Discussion in 'Commodity Futures' started by ASusilovic, Sep 23, 2009.

  1. You know how China has bolstered hopes for global growth, with its command-stimulus programme sucking in raw materials, supporting commodity prices and generally making the world feel better?

    Well, it’s over.

    At the very least, China appears to be coming off the boil as central government stockpiling and inventory-rebuilding eases. Consider this extract from a table distributed by Barclays Capital on Tuesday:


    Copper imports have come rattling back from the record levels seen earlier this year. While these are extreme snapshots from a rather contradictory overall picture, the trend is also apparent in sugar, soybeans, and wheat for some reason:


    The BarCap commodities team, led by Kevin Norrish, are not quite sure what to make of this. Their latest Feeding the Dragon note dispatched to BarCap clients comments:

    Trying to disentangle and quantify all of these different drivers of inventory accumulation is a complicated task, and it is difficult to generalize across different commodity sectors. However, what does appear to be the case is that widespread inventory accumulation that boosted domestic stocks of different commodities by varying degrees is now easing and a phase of slower import growth or even outright declines in some markets has commenced.

    Of course, over the long haul Chinese imports of many commodities will continue to grow at a cracking pace, thanks to rapid local demand growth and a lack of domestic resources. Right now though, the assumption that China can lift everyone out of the soup is looking a bit suspect.