China Commodities Market Signals Rebound

RIO DE JANEIRO, BRAZIL – From oil to copper and coal, China’s giant commodity industry signals that the first economy to be affected by the coronavirus is close to returning to normal.

Bloomberg Economics estimates that most of China, approximately 90 to 95 percent, had already returned to activity last week at a faster pace in the steel, building and oil processing industries.

Oil refineries, as well as coal-fired plants, are approaching last year’s operating rates, while metal inventories are starting to decline from record or near-record levels.

It is a three-month cycle of collapse and rebound marked perhaps by the most encouraging achievement for countries still facing the virus: For the first time since January, China has not recorded any deaths by Covid-19.

On the road

Drivers in China have been returning to the roads in greater numbers than at the same time last year, as social distance encourages more people to use their own cars instead of public transport, according to BloombergNEF.

The difference is that drivers seem to avoid non-essential travel. This is evidenced by congestion data from the TomTom Traffic index, which shows a steep decline out of rush hour, and traffic on roads during last weekend’s holiday. The number of vehicles was far below last year’s, as the government advised people to stay away from ancestral cemeteries.

Stocks

The Chinese copper market signals a rebound, which is a useful indicator for the economy in general, due to the use of metal in building and power transfer. Stocks monitored by the Shanghai Futures Exchange dropped for the third week from a record level, while reserves on the London Metal Exchange also declined.

Steel rebar inventories are also declining in China after the record increase due to the prolonged halt in building activities.

Inventories were built up as steel companies tried to ship products amid logistical and transport constraints. Nevertheless, analysts caution that despite the decline, stocks are still high and steel companies face tight margins.

Crushers

Soybean processors in China face supply restrictions since March due to virus-related import restrictions, with weekly crushing volumes between 1.4 and 1.5 million tons, according to operators. This volume is expected to rebound to around 1.8 million tons in the second half of this month, as more grains are shipped from abroad, traders said.

Source: InfoMoney