Commodities feverish on China slowdown

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Published time: March 07, 2012 13:09
Edited time: March 07, 2012 17:09

When it comes to the commodities market, if China says it even plans to sneeze, others get a cold. And commodity markets got a fever after Chinese Premier Wen Jiabao lowered the country’s growth target.

Although prices recovered slightly on Wednesday after a fall on Tuesday, investors remain cautious that a slowdown of the Chinese economy will cut demand for commodities.

Wednesday copper futures added 0.76% after falling 2.52% on Tuesday while silver gained 1.39%. Agricultural commodities were also affected by China’s gloomy outlook bouncing back a little on Wednesday. Sugar added 0.86% and coffee gained 0.28% after dropping 4.1% to the lowest level since December 2010.

On Monday Wen Jiabao announced the country’s growth outlook was lowered this year to 7.5% from 8%. The S& P's GSCI Spot Index of 24 commodities dropped 1.54% by the end of Monday’s trading session in New York.

China used to be the world's biggest consumer of raw materials as its demand takes up more than 40% of the world’s copper, zinc, aluminium and nickel. Experts expect, the slowdown would hit the country’s hot construction industry, which supported strong demand for industrial metals.

Oil prices didn’t react to the Chinese news as tension with Iran keeps driving prices in the other direction.

Meanwhile analysts expect that even China’s growth would be lower than expected it is strong enough to support mining industries.