Nouriel Roubini warns China could cause commodity price slide
Nouriel Roubini, the respected US economist, has warned that commodity prices could sag in the coming months as a consequence of a likely slowdown in China's aggressive stockpiling programme.
Professor Roubini, an academic at New York University and one of the very few prominent economists who predicted the magnitude of the financial crisis, said he feared that China had overstocked and prices would slide as the economic powerhouse cut its rate of accumulation in the second half.
Speaking at a mining conference in Kalgoorlie, Australia, Prof Roubini said that while he expected most commodity prices would continue to recover gradually in line with the global economy, China's short-term "massive stockpiling of commodities" had potential ramifications for prices.
"My concern is that China might have accumulated an inventory of commodities that is probably excessive to the growth of its economy," he told delegates, adding that the recession would "continue to the end of the year".
China has stockpiled heavily following a sharp contraction in global demand for industrial staples including metals and oil. It imported 1.8m tonnes of refined copper in the first half – up 160pc on the same period a year earlier – while primary aluminium imports increased 16-fold.
China has also been acquisitive in the mining sector, with state-owned Minmetals buying most of the assets of Oz Minerals, an Australian mining company, in a A$1.73bn deal (£863m) earlier this year, and Chinalco, another state-owned company, making a failed bid to increase its holding in Rio Tinto.
Chinese buying has helped buoy prices on the Shanghai and London metal exchanges this year, with copper prices up by about 80pc.
The scale of the financial crisis has bolstered the profile of Prof Roubini, whose warnings of a brewing economic storm at International Monetary Fund meeting in September 2006 were broadly met with scepticism.
Prof Roubini had said that the US was likely to face a once-in-a-lifetime housing bust, sharp declines in consumer confidence and deep recession – forecasts that all proved accurate. Last month he warned that a "double-dip" recession was possible unless governments that had embarked on monetary stimulus strategies and gorged on debt found a clear strategy for exit.
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