Title: The Impact of China's Economic Slowdown on Commodities Markets
Headings: The Impact of China’s Economic Slowdown on Commodities Markets
The Impact of China’s Economic Slowdown on Commodities Markets
The Recent Performance of Commodities
Agriculture
Metals
Energy
Recent Surging Chinese Imports
The Outlook for 2015
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Content: This fall in demand growth has seemingly contributed to the end of the 2002-2012 commodities “super-cycle”, a demand-driven price cycle that has lasted over a decade—decidedly more than the few years associated with a normal economic cycle. During this super-cycle period, China’s GDP grew by an average of 10.6 percent, and the country became the world’s top importer of commodities. The Recent Performance of Commodities
The S&P GSCI index tracks the investment performance of the world’s most liquid commodity markets. The index can be used to show the marked decline in commodity performance, as grouped according to respective product classes, over recent years: (Source: S&P GSCI)
From 2012 onwards, the prices of many commodities started to decline, before the majority of commodities plunged dramatically during 2014. Many economists recognise that China’s economy is still growing and that commodity prices are still considerably above historical levels. However, the combination of a global surplus of output in many commodity markets and expectations of a further slowdown in demand from China continues to underpin current market weakness and drive prices down. Agriculture
The cotton market has been among the most significantly affected. Following a spike in the cotton price in 2011, the Chinese government initiated a policy of buying much of its domestic cotton output to put into reserve at a higher price than the prevailing world price, in order to support its farmers.