Another reason to worry about Chinese commodity demand

There are reasons to be optimistic. More infrastructure is coming. But there are other, more powerful forces, that make it a worry. We know steel demand is being dented by the manufacturing recession and weak car demand. But the big one is realty. It always is, constituting 30-40% of steel consumption. This is a problem in the year ahead with sales already falling and starts tracking them lower:

Note that the weakest periods of bulk commodity prices have always coincided with real estate weakness.

Then there is this from T.S. Lombard:

Tier three and below cities comprise roughly three-quarters of construction demand. Any slowdown of any size in this segment of the Chinese economy will materially damage bulk commodity prices.

David Llewellyn-Smith
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