Macquarie: Commodities bottom is in…for now

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From Macquarie:

 Metals and bulk commodity markets are in the midst of a mini-renaissance, with the vast majority of those we cover showing gains over the levels seen at the start of the year. While supply always gets focus, it is the demand side of the equation that has been more influential in this process. And, as with most things in metals, the incremental shift has come from China.

 At the start of 2016, we expected some stabilisation in the metals demand environment at a sub-trend level, with aluminium alone among the major metals having demand growth >2.5%. However, the latest data points confirm that Chinese construction activity remains in a positive trend while we are in a nascent global industrial production recovery. We continue to increase our 12- month forward demand outlook across industrial metals as the Chinese government prolongs its more commodity-intensive phase of growth, something we expect to persist through the next political transition in 2017. This creates a relatively short, demand-driven window of opportunity for commodity prices and commodity producers.

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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.