Just few months back all the commodities including crude oil, copper, zinc, aluminum and lead reached multi year low. Crude was languishing around 35 dollars a barrel which was just 25% of the peak of 147 dollars reached nearly ten months back.
But all the commodity prices have started shooting up once again in the last few months, not because of any recovery in the US or Europe demand. The key reason behind the increase in commodity prices is the sudden surge in Chinese demand.
The Chinese government has gone into massive stimulus spending for spurring domestic demand in the last few months. The 550 billion dollar stimulus plan has forced many companies to start piling up all commodity stocks for their future requirements.
The unexpected surge in demand from China has resulted in over 20% increase in commodity prices. Aluminum prices have surged by over 25%, whereas copper has seen a 30% increase. Even crude oil prices are higher by over 40% from their lows.
If China is able to hold on to its growth for next few months, then the commodity prices may not see any major decline in the next several quarters. By then US and Europe would have started recovering, we hope.
Global commodity prices zoom due to China effect
May - 30 - 2009 - Saturday
