2017 Resource Optimism Based on China Forecasts

China appears set to defy the skeptics once again and contribute to ongoing commodity price and demand strength in 2017. This follows on from a robust 2016 performance that exceeded the expectations of experts, particularly during the second half of the year. Many forecasters seem to have raised their growth estimates, despite the actions of China's policy makers to try and rein in its property sector and rising debt, with prospects of a hard landing receding. Domestic consumption appears set to be a key factor, supporting retail sales growth of around 10% according to independent estimates. The relevance to commodities and resource companies is obvious, supported by the fact that Chinese investors traded a record volume of commodity futures last year - primarily motivated it appears by speculation that commodity shortages are looming. Bloomberg quotes data that shows the combined aggregate trading volumes on the Shanghai Futures Exchange, Dalian Commodity Exchange and Zhengzhou Commodity Exchange jumped by 27% from 2015 levels to 4.1 billion contracts. Turnover across the bourses rose by 30% to a record 177.4 trillion yuan ($25.5 trillion).

Gavin Wendt
Founding Director

Gavin has been a senior resources analyst following the mining and energy sectors for the past 25 years, working with Intersuisse and Fat Prophets. He is also the Executive Director, Mining & Metals with Independent Investment Research (IIR).

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