The CME Group said Thursday that commodity prices may experience downward pressure over a longer-term time horizon as the world’s second largest economy, China, continues to face economic struggles.
The firm outlined that almost all commodity prices track the economic developments in China and follow with usually about a one-year lag. As such, CME Group stated: “Even if China succeeds in boosting growth in 2024, commodity prices might not sustain a rally unless global conflicts intensify supply disruptions.”
CME Group noted that China is the world’s largest consumer of raw materials, as the nation imports up to 40% of the entire world’s industrial metals. In addition, China also imports 10% of the globe’s crude oil and around another 10% of the food eaten in China is imported from around the world.
“And China’s economy hasn’t been growing as strongly as many commodity producers had expected,” the firm said. “Last year, China expanded at a 5.2% annual pace, which sounds good until one remembers that 5.2% growth was compared to 2022, when China spent much of the year in lockdowns.”
Therefore, moving forward commodity prices may find themselves under pressure as Beijing struggles with its economic woes.
See the below breakdown of some of Wall Street’s most popular commodities along with their price action since each of their 2022 high points. Additionally, see related ETFs alongside for more information as well.
- Crude Oil (CL1:COM) -40.7%: (NYSEARCA:USO), (NYSEARCA:UCO), (DBO), (NYSEARCA:USL), (OILK), (SCO).
- Natural Gas (NG1:COM) -73.2%: (UNG), (BOIL), (KOLD), (UNL).
- Copper (HG1:COM) -22.9%: (CPER), (COPX), and (JJCTF).
- Cobalt (LCO1:COM) -66.5%: (BATT), (ION), (VAW).
- Soybeans (S_1:COM) -34.8%: (SOYB).
- Corn (C_1:COM) -50.1%: (CORN).
- Wheat (W_1:COM) -56.9%: (WEAT).
