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Commodities remain subdued as economy accelerates, markets still skeptical
Global Times | October 20, 2013 22:13
By Michael Bellart in Shanghai
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Domestic metal futures made modest gains Friday as China's official GDP figures for the third quarter came in within expectations.

The most-traded copper contract on the Shanghai Futures Exchange (SHFE) rose 0.87 percent Friday to close at 52,250 yuan ($8,569) per ton, up 1.16 percent for the week.

In the iron and steel sector, the most-traded SHFE steel rebar contract rose 0.28 percent Friday to close at 3,568 per ton, down 0.92 percent for the week.

The contracts increased as the Chinese government reported that the economy picked up steam in the third quarter, putting it on track to meet this year's official GDP growth target of 7.5 percent.

The modest gains in hard commodities illustrate that the market remains skeptical about the health of the economic recovery.

The fact that companies have continued to put off restocking key commodities like steel suggests the recovery, which began in the late second quarter, remains fragile, according to economists Liu Li-Gang and Zhou Hao from the Australian bank ANZ.

"The inventory data that we watch closely all suggests that there are few signs of restocking activity," they wrote in a research note Friday.

In the steel sector, for example, iron ore stockpiles at major Chinese ports have remained below their five-year average level, even as steel output has picked up. "Steel product inventory also declined to the lowest level since 2009, indicating that steel dealers remained cautious about future demand,"  Liu and Zhou wrote.

There was still room for optimism, however. "As long as the housing sector remains upbeat, China's investment growth is expected to maintain its solid pace, which will contribute steadily to the economy, and China's demand for hard commodities will remain elevated," they wrote.

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