Business Times - 04 Aug 2009
(KALGOORLIE, Australia) China may have overstocked on commodities, risking a slowdown in buying and a correction in prices in the second half of this year, top economist Nouriel Roubini said yesterday, also reiterating that the global recession would continue until year-end.
Mr Roubini, a New York University professor and one of the few economists who predicted the magnitude of the financial crisis, said he expected most commodity prices to continue a gradual recovery in step with rising general economic growth.
'The recession will continue to the end of the year,' Mr Roubini said at the Diggers and Dealers mining conference in Western Australia. But he added: 'As the global economy moves towards growth as opposed to a recession, you are going to see further increases in commodity prices, especially next year.' Still, he warned there was still a risk of a second slump.
'In the short term there has been a massive stockpiling of commodities by China,' he noted. 'My concern is that China might have accumulated an inventory of commodities that is probably excessive to the growth of their own economy.'
China went on a buying spree after the global collapse in demand for oil, metals and other industrial staples, bulking up its domestic government inventories and snatching up overseas assets from Australia to Africa to Canada to safeguard growth.
China's refined copper imports, at 1.8 million tonnes in the first half, were up 160 per cent on the same period a year earlier, while primary aluminium imports rose a stunning 16-fold. Chinese buying has helped drive up both Shanghai and London Metal Exchange prices this year, by around 80 per cent on both LME and Shanghai copper and 75 per cent on LME lead, 40 per cent on zinc and nearly 20 per cent on aluminium.
As a result, there is a risk commodities prices will slump again as China now slows its buying spree. 'The risk in the second half of this year is that the rate of accumulation in China must slow down - one of the factors that a downside correction in commodity prices, however modest, may occur,' Mr Roubini added\. \-- Reuters
(KALGOORLIE, Australia) China may have overstocked on commodities, risking a slowdown in buying and a correction in prices in the second half of this year, top economist Nouriel Roubini said yesterday, also reiterating that the global recession would continue until year-end.
Mr Roubini, a New York University professor and one of the few economists who predicted the magnitude of the financial crisis, said he expected most commodity prices to continue a gradual recovery in step with rising general economic growth.
'The recession will continue to the end of the year,' Mr Roubini said at the Diggers and Dealers mining conference in Western Australia. But he added: 'As the global economy moves towards growth as opposed to a recession, you are going to see further increases in commodity prices, especially next year.' Still, he warned there was still a risk of a second slump.
'In the short term there has been a massive stockpiling of commodities by China,' he noted. 'My concern is that China might have accumulated an inventory of commodities that is probably excessive to the growth of their own economy.'
China went on a buying spree after the global collapse in demand for oil, metals and other industrial staples, bulking up its domestic government inventories and snatching up overseas assets from Australia to Africa to Canada to safeguard growth.
China's refined copper imports, at 1.8 million tonnes in the first half, were up 160 per cent on the same period a year earlier, while primary aluminium imports rose a stunning 16-fold. Chinese buying has helped drive up both Shanghai and London Metal Exchange prices this year, by around 80 per cent on both LME and Shanghai copper and 75 per cent on LME lead, 40 per cent on zinc and nearly 20 per cent on aluminium.
As a result, there is a risk commodities prices will slump again as China now slows its buying spree. 'The risk in the second half of this year is that the rate of accumulation in China must slow down - one of the factors that a downside correction in commodity prices, however modest, may occur,' Mr Roubini added\. \-- Reuters
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