Copper, Oil Prices Slip as Commodities May Be Faltering
Posted by Gregg Killoren on June 22, 2009
The Financial Times reports that copper imports to China hit an all-time high in May; however, copper supplies in China are being used up at a slower rate. The fear of a supply glut has copper prices falling to a two-week low.
Estimated Chinese copper consumption dropped 3.5 per cent on the month, while imports rose to 337,230 tons of refined copper, up six per cent from April’s then-record high of 317,947 and 258 percent higher than the figure a year before.
The World Bank recently raised its GDP forecast for China to 7.2 percent for 2009 from an earlier prediction of 6.5 percent. However, according to Ardo Hansson, the bank’s lead economist for China, “Government-influenced investment will strongly support growth in 2009. However, there are limits to how much and how long China’s growth can diverge from global growth based on government-influenced spending.” Hansson added, “It is too early to say a robust, sustained recovery is on the way.” China has spent approximately $590 billion on economic stimulus thus far, and its fiscal deficit is expected to rise to about 5 percent of GDP, leaving the country little room for further stimulus. In order to maintain current employment rates and continue its economic expansion, China needs to at least meet the government’s target of 8 percent GDP growth.
In other news, oil prices dropped back below $70/barrel to near $68/barrel as traders question the health of the global economy and the strength of any coming economic recovery. The fact that this price decline comes in the face of renewed attacks on oil installations in Nigeria and continued unrest in Iran may signal a reversal of the recent uptrend in oil prices.
