News Grains & Raw Material
China no longer decisive in commodities market
China is no longer the main factor in commodity pricing. That is according to the investment bank Goldman Sachs. Due to the rapid recovery in the developed economies, Beijing is being supplanted by Western parties as the main buyer in the commodity markets.
"The rising trend in commodity markets is not caused by Chinese speculators, nor by Chinese demand growth. The high prices revolve around scarcity and is led by the recovery of the advanced economies," Goldman Sachs writes.
Commodity prices fell somewhat in May following Chinese warnings about domestic speculation. Important markets such as oil, copper and soy remain under the spell of shortages, also for the second half of this year. According to the bank, there is little evidence that production and therefore supply is increasing to such an extent that the upward momentum in the markets is being reversed.
State intervenes
It seems like a relic of the Maoist past, but China - in the largely state-controlled planned economy - still has a Department for Prices. The officials there have their hands full in the current turbulent market. Chinese policymakers have fired a constant barrage of rhetoric and administrative measures into the market in recent weeks to curb the rise in commodity prices. For example, transaction costs have been increased, tax rules have been changed, sector analyzes have been censored and companies are encouraged to sell their inventories.
According to Goldman Sachs analysts, these efforts are almost certainly doomed to failure due to strong global demand and limited supply, although the measures will have some effect in the near term. The bank does not specifically deal with agricultural commodities. But various analysts point out that, in addition to supply and demand, growth conditions also largely determine sentiment in, for example, the maize, soy and wheat markets.
Jurphaas Lugtenburg
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