Basic Materials: China Will Keep a Lid on Most Commodities
Looser credit conditions or fiscal stimulus may temporarily boost China's demand for coal, copper, and iron ore, but the bounce would be fleeting.
Prices for most industrial commodities (for example, coal, copper, and iron ore) fell considerably last year and have largely continued their descent in 2015. Slowing Chinese demand has been the common denominator, reflecting a deceleration in construction and industrial production. We view this as a structural slowdown catalyzed by overinvestment and rising debt. Although looser credit conditions or fiscal stimulus may succeed in boosting construction and industrial activity, this would likely provide only a temporary respite.
Daniel Rohr does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.