Recent reports show our world economy growing yet metal commodity prices continue to fall significantly on a daily basis. Some believe that this shows that our reported growth may not be as good as reported.
Fears over China’s slowing growth so far in 2014 have hurt metal commodity prices. Copper prices have dropped 12% so far this year. There are many factors to take into account but concerns over China’s slowdown in production is a major one.
Worries over China’s debt-laden financial system have added to the downward pressure, as investors used industrial commodities to back loans. Now banks are starting to call these loans in which has led to forced sale of commodities.
Due to China’s growing middle class, agricultural commodities have increased this year. Palm olive oil which is used in everything from cooking oil to household detergents, has climbed this years by 3%. Soya beans are up 10% and wheat 11%.
Again there is more than Chinese demand affecting these prices. Dry weather in Brazil and Southeast Asia has hurt supply of palm oil. Also the strife in the Ukraine has not helped as they are the largest producer of sunflower oil.
The trend is a double edged sword for China. Lower prices for iron ore could push down cost for steel makers, but higher prices for food will make it tougher for the average consumer which could spur a rise in inflation.
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