China-driven commodities rally nearing end
Posted: 21 June 2009 1131 hrs
Channel News Asia
SHANGHAI: China has been driving up commodities prices by stockpiling to prepare for global recovery, but with inventories overflowing and no end to the crisis in sight, analysts say the rally may soon end.
China has been buying up crude oil, copper, coal and a host of other key raw materials even while the financial slump has slashed demand for the exports responsible for the Asian giant's once ravenous appetite.
Despite the sharp drop in shipments, Chinese raw materials buyers have tapped a surge in bank loans to capitalise on low commodity prices and low shipping fees, analysts said.
But the buying is likely to slow, they warned.
"China has been stockpiling commodities since the fourth quarter when prices became really cheap," said Yang Yijun, a commodities analyst at Wellxin Consulting based in the southwestern city of Chengdu.
"But large scale buying is gradually coming to an end. China's reserves are almost at full capacity."
Macquarie Bank warned in a research note last week that "the key concern centres around the scale of Chinese buying".
Over the past three months, as the volume of China's purchases increased, the Standard & Poor's GSCI, an index of global commodity prices, shot up 26.5 per cent.
However, overall prices remain lower than before the financial crisis struck. Even with those gains, the overall index is down 58.5 per cent from a year ago.
Posted: 21 June 2009 1131 hrs
Channel News Asia
SHANGHAI: China has been driving up commodities prices by stockpiling to prepare for global recovery, but with inventories overflowing and no end to the crisis in sight, analysts say the rally may soon end.
China has been buying up crude oil, copper, coal and a host of other key raw materials even while the financial slump has slashed demand for the exports responsible for the Asian giant's once ravenous appetite.
Despite the sharp drop in shipments, Chinese raw materials buyers have tapped a surge in bank loans to capitalise on low commodity prices and low shipping fees, analysts said.
But the buying is likely to slow, they warned.
"China has been stockpiling commodities since the fourth quarter when prices became really cheap," said Yang Yijun, a commodities analyst at Wellxin Consulting based in the southwestern city of Chengdu.
"But large scale buying is gradually coming to an end. China's reserves are almost at full capacity."
Macquarie Bank warned in a research note last week that "the key concern centres around the scale of Chinese buying".
Over the past three months, as the volume of China's purchases increased, the Standard & Poor's GSCI, an index of global commodity prices, shot up 26.5 per cent.
However, overall prices remain lower than before the financial crisis struck. Even with those gains, the overall index is down 58.5 per cent from a year ago.
Last edited:
