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This index of shipping costs for bulk commodities has moved up solidly for the past seven months. Many people dismiss it as an indicator of global growth, however, arguing that the ships are being monopolized by Chinese demand for things like iron ore, and all they are doing is stockpiling the stuff. I prefer to think that the Chinese have a reason for buying commodities, and that it has to do with the fact that their economy is growing at multiples of most other economies in the world. What's good for China is good for the world; the more they produce the more they must consume.
6 comments:
Your earlier analysis dismissed China as the major reason commodities were rallying and now you are back tracking while incorporating the China story into your "green shoots" theory.
It has been China 100% but that does not mean "what is good for China" is good for us. On the contrary, speculative behavior by China could be another disaster in the making as Chinese raw material buyers tap bank loans to facilitate their hunger despite the lack of demand for their products.
And I do not mean 100% literally but you get my drift...
I think I've consistently maintained that the rise in the Baltic was not something to dismiss, whether or not it was all or mostly due to Chinese purchases of commodities. My main argument has been that there is some genuine demand driving this, and that is good for global growth.
the standard view in the shipping world is that Chinese steel demand is picking up, so that large iron ore purchases of late have not been massive speculative stockpiling. How end use demand for Chinese steel plays out is still a big question but the "stockpiling ahead of iron ore supply negotiations" meme has been proved too bearish. A counter-point to this is that port congestion has reemerged as a problem, so that rates are higher than end demand would indicate. This is the type of debate that markets are mad of...
I think China is keeping an illusion going at the expense of it's people:www.telegraph.co.uk/.../Chinas-banks-are-an-accident-waiting-to-happen-t.
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/5675198/Chinas-banks-are-an-accident-waiting-to-happen-to-every-one-of-us.html
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