Stronger Chinese demand stabilises commodities prices

HONG KONG - Stabilisation in Chinese economic conditions has helped support global commodity prices in the past couple of months. The overall IMF primary commodity price index rose 1.1% in August (in US$ terms) to be 0.1% higher over the past year. Metals prices had the strongest performance, rising by 4.8% in the month, while the price of energy commodities was +2.3% higher. The weaker area for the month was food prices, which fell 4.6% in August to be 7.2% lower over the past year, reflecting an ongoing pick-up in supply.

HSBC says that, in aggregate, global commodity prices rose further in August, by 1.1% in US$ terms, building on a 2.6% rise in the previous month. “A weaker US$ likely explains some of the rise in prices,” HSBC says. “Taking the past couple of months together, however, it seems that the stabilisation in China's demand is playing a role in supporting metals prices. Geopolitical concerns have also underpinned a rise in energy prices.”

From a longer-term perspective, HSBC says, commodity prices are 12% below the peak reached in 2011. However, relative to the average through the 1990s, commodity prices remain 240% higher in nominal terms – and 122% higher in real terms. For metals, the IMF commodity price index shows metals prices increasing by 4.8% in the month, with

particular strength seen in prices of iron ore, tin and lead. Copper prices also made solid gains, rising by 4.0% in the month. www.hsbc.com (ATI).