Indiana Grain Company, LLC

Posted: 10/13/11

By: tomgrisafi

An interesting point was raised in the Wall Street Journal today.

China, the world's biggest consumer of key commodities, "is on a diet."

According to data and a compelling argument made by the WSJ, the latest trade data shows imports holding up in September, with the volume of major commodity imports little changed from August. But standing back from the monthly detail, 2011 is not a strong year. Imports of copper and soy beans have fallen from 2010. Growth in crude oil imports is sharply down.

Still, there's hope that the hunger will return.

The International Energy Agency forecasts Chinese demand for oil to grow by 5.2% in 2012. With oil imports in the first three quarters of 2011 up just 4%, GDP growth expected to slow in 2012, and the 12th five year plan calling for a reduction in energy intensity per unit of GDP, that looks optimistic.

Cut the IEA's forecast by two percentage points and global oil demand growth would fall by 200,000 barrels per day, equivalent to 15% of the increase forecast currently. With supply set to increase once Libya becomes more stable, any increase in oil going to inventories will pressure high-flying Brent crude prices in particular.

Commodities bulls will note that China is a strategic consumer and lower prices may tempt Chinese buyers to snack on bargains. There are signs that may already be happening in copper markets, where prices have rebounded slightly from lows close to $3 a pound early in the month.

To read more, check out this morning's WSJ.

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