Since the collapse of Lehman Brothers, commodity pundits have iteratively noted that the commodities markets will regain their lustre once China resumes its consumption appetite.
If a new study is to be believed, the home to one-fifth of mankind is about to resume its consumption of base metals.
China's fixed asset investment (FAI), which primarily refers to investments on infrastructure projects, rose by 26.5 per cent year on year (yoy) in the first two months of 2009, Judy H Zhu, a commodity analyst with Standard Chartered Bank wrote in her report. Growth in railway-sector investment, which forms a large portion of the government stimulus package, surged to 210 per cent yoy in the first two months of 2009, she highlighted.
"Apparent consumption of copper, steel and zinc is recovering. China's demand for some commodities has recently shown very early signs of bottoming out," Zhu wrote.
"A breakdown of the FAI data indicates that the effects of the fiscal package are emerging. FAI by state-owned enterprises and companies in which the government has a stake rose by 35.6 per cent yoy in the first two months of 2009, compared to 23 per cent in 2008, while investment by the central government rose by 40.3 per cent yoy, versus 30 per cent in 2008," Zhu detailed.
James Leake, the Managing Director of ICAP Shipping, a London based company, had recently said that Chinese steel stocks have surged to historic highs reducing demand from local producers. An increased demand from China had in the first two months this year helped the Baltic Dry Index to rally.
Though Leake said that the Chinese rally is showing signals of impeding, Zhu held a more positive view.
"China's headline purchase managers index (PMI) realised a fourth consecutive month improvement at 52.4 in March. This is the first time in six months that the index has returned above the 50 neutral level."
Keep up with the latest business news from the region with the Emirates Business 24|7 daily newsletter. To subscribe to the newsletter, please click here.