You are here » Home » Chat Home » Will China continue to haunt commodity markets in 2016?


  • Kunal Shah - Head of Commodities Research, Nirmal Bang Commodities

    Kunal Shah

    Head of Commodities Research, Nirmal Bang Commodities

    DATE: February 09, 2016, 12:00 PM

    SUBJECT: Will China continue to haunt commodity markets in 2016?




    Hello and welcome to the webchat



  • R


    How do you see the metal pack behaving in the near term in the wake of slowdown of growth in China?


    I believe we have seen the worst when it comes to base metals, yes China's GDP growth rates have cooled off and China is translating its self from investment led growth model to consumption led growth model. So going forward Chinese GDP rate may contract but the size of the economy is getting bigger and bigger. In order to prevent sharp outflows from the country, stabilize the stock market and bring down inter bank lending rates Chinese central banks have taken many steps and China's foreign exchange reserve has also seen sharp drop, we believe in coming moths we will see China's economy will stabilize gradually which will prevent downside in metals.

  • N


    Over the past couple of years, China has shifted from a manufacturing-oriented economy to a service-driven economy and is thereby using a less-energy intensive approach to growth. Hence, the demand for crude oil in the world’s largest oil consuming country has plunged sharply. What is your forecast on oil?


    Longer they stay lower, sharper would be the bounce. During the year 2015 there has been major drop in investment in oil across the globe and most of the non conventional oil producers are finding very difficult to cope up with lower prices. Current crude oil prices have factored in most of the negatives like supply glut, China slowdown and Iran production. By the end of the year WTI crude oil would test $40-$42/barrels per days.

  • R


    How do you think China commodity crisis will impact Indian companies like Hindalco and Vedanta this year including their foreign operations?


    Demand growth rate of metals from China are likely slowdown, even in 2015 in spite of the fact prices have remain under pressure we have not seen negative demand growth in metals. If China's economy witnesses hard lending than Indian miners exporting to China will face headwinds else the worst is already priced in.

  • A


    Gold seems to be emerging as the safe haven amid all the turmoil. What is your outlook on the commodity for the first six months of calendar year 2016? Is the demand outlook from China for the commodity on a decline?


    Investment demand has been weakening since the year 2013, in first one month of 2016 we have seen sharp surge in gold investment demand we believe gold can test $1250/ ounce during the first six month of 2016. We believe jewellery demand may remain subdued but investment demand is likely to remain from China.

  • P


    Silver is used in various industrial applications. Do you envisage further fall in silver prices from current levels owing to weak demand from China? What is your outlook for the current calendar year?


    Silver, I am expecting to test Rs.40000 -42000/by the end of the year and silver market is in deficit and I expect Silver to rally, trend is bullish for the white metal

  • S


    With commodity prices under pressure across the board, what is your call on metals such as copper, aluminium and nickel? Is there a paradigm shift happening in the global metal landscape?


    I am moderately bullish on base metals and I believe Chinese economy may stabilize during the year and which help prices of base metals to recover some of its lost ground.

  • D


    With weak demand from major economies such as China and US commodity prices are likely to remain under pressure. Do you forsee bankruptcies in the commodity space going forward?


    If one look at the mining stocks, stocks of energy companies and commodities trading houses one just get a feeler that the worst has been already priced in. Yes, many miners and energy producing companies are finding very difficult to survive in current environment and if prices remains lower for longer than we may see wave of bankruptcies specially in energy sector. We believe significant downside from here is unlikely as worst is already priced in.

  • R


    Do you expect any of the commodities to recover this year?


    Yes, I am bullish on precious metals, and base metals I expect gradual recovery in prices, crude oil also should recover during the second half of the year as supply cuts are likely to intensify during the year which will help commodities prices to recover. U.S. crude oil production will decline by atleast 0.5mbpd and other OPEC producers also may announce production cuts which will lead to gradual uptick in crude oil prices.

  • A


    What is the outlook for industrial metals such as Copper, Zinc?


    Industrial commodities such as Copper and Zinc in the first one month have shot up by 5-10% respectively. I expect gradual recovery in prices of industrial metals going forward in 2016 as we expect dollar index to weaken so that will also bring back investors in commodities.

  • N


    For how long will the co-relation between the markets, oil and gold continue?


    I remember back in 2006, 2007 traders use to correlate gold and oil and will upside in crude oil futures inflationary expectations used to trigger buying in gold but well in last 4-5 months prices of crude oil have corrected from $45 to $30/barrel and gold prices have shot up from $1050 to $1200/ounce. In current economic environment where in spite of massive monetary stimulus and ultra low rates inflation didn't pick up and now will central bankers policy clearly failing to stimulate the growth, investors have again started to put bets on U.S.treasury and gold. So in spite of crude oil in pressure, gold prices are moving up.

Upgrade To Premium Services

Welcome User

Business Standard is happy to inform you of the launch of "Business Standard Premium Services"

As a premium subscriber you get an across device unfettered access to a range of services which include:

  • Access Exclusive content - articles, features & opinion pieces
  • Weekly Industry/Genre specific newsletters - Choose multiple industries/genres
  • Access to 17 plus years of content archives
  • Set Stock price alerts for your portfolio and watch list and get them delivered to your e-mail box
  • End of day news alerts on 5 companies (via email)
  • NEW: Get seamless access to at a great price. No additional sign-up required.

Premium Services

In Partnership with


Dear Guest,


Welcome to the premium services of Business Standard brought to you courtesy FIS.
Kindly visit the Manage my subscription page to discover the benefits of this programme.

Enjoy Reading!
Team Business Standard