GADFLY: China’s commodities’ stockpiles are about supply cuts and speculation
Rather than demand, state stimulus is currently responsible for an unusually large degree of economic activity
Sydney — It’s when the tide goes out that you see who’s been swimming naked. That’s the issue commodity investors should be focusing on right now, as the shadow of China’s Communist Party congress fades and winter anti-pollution shutdowns start to bite. At the heart of the global metals trade is a powerful mystery. China accounts for about half of the consumption of most industrial commodities, but its appetites are ruled by unpredictable diktats from Beijing. This engenders a degree of Kremlinology, as analysts attempt to predict how Xi Jinping’s green-tinged party congress speech will mesh with an economic model that’s traditionally leaned on state-owned heavy industry for growth. Right now, it’s the environmental theme that appears to be winning out. Electricity generation from fossil-fuel burning thermal power plants fell year-on-year in October for the first time in 15 months, as output from hydro-electric dams roared back after a lean period. Metals that rode the China demand ...
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