Sunday, October 24, 2004

China is having growing pains

China's economy may be due for a cooling off. This means commodity prices may soon decline. The Sunday Herald of Scotland has more.

The urban landscape of places such as Beijing has altered dramatically in recent years, but, says Ivan Turok, such massive, ambitious expansion simply cannot be sustained
Further signs that the Chinese economy is cooling. Purchasing Magazine says copper futures are down because of suspected lower demand from China.
October 18, 2004

World copper prices dropped last week as a result of massive selloffs by institutional investors who are concerned that economic growth in China is slowing. Copper prices worldwide fell to two-month lows, as indicated by the fact that the price for London Metal Exchange three-months copper (red metal to be delivered in three months) fell to $1.26/lb. at the close on Thursday. This LME futures benchmark had started the week at $1.42/lb. “But, when nonferrous metal prices began to get sold off, they got pummeled, with copper leading the descent,” says Edward Meier at Man Financial’s London office.

Copper and other base metals had hit multi-year highs early this month on strong demand, especially from China, and tight supply after years of underinvestment in new production. Copper demand in China, which consumes around a fifth of the world's supply of the metal, was forecast to rise 9% to 10% next year compared to around 8.5% in 2004. However, China's bubble may burst, as the government in China has begun to limit lending to manufacturers in order to cool the economy.


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