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: As a result, China’s reserves have increased six times since 2010, and it now holds 60 percent of the world’s cotton reserves. Between 2011 and 2013, the world market outside of China saw a year-on-year excess of cotton supply over demand. During this time, China imported cotton in an amount roughly equivalent to this excess, which had the effect of supporting world prices. However, as domestic demand slowed down, the government was faced with an excess amount of unwanted stockpiles. It, therefore, ended its reserve-building policy in time for the 2014 crop and instead focused on subsidising local farmers. It also began unloading some of its stockpiles back onto the world market at reduced prices, which has since exerted substantial downward pressure on the prevailing world price. By November 2014, the global benchmark cotton futures price was below 60 cents per pound, the lowest since 2009, having lost more than a third of its value since May.
Along with cotton, dampening commodities demand has led to a build-up in inventories of iron ore, coal and grain, which has led to a drop in prices. China has, therefore, implemented a range of protectionist measures in an attempt to limit imports and shield local markets. Metals
In its October Commodities Market Outlook, the World Bank specifically cited demand weakness from China as a principle reason for the fall in metal prices in 2014. Due to a global market surplus of iron ore that coincided with China’s slowdown and the subsequent imposition of import barriers, the price of iron ore fell by 47 percent in 2014 and hit a five-year low of $66.84 per tonne in December.