Surging Chinese Commodity Interest
The latest data shows that Chinese investors traded a record volume of commodity futures last year – another factor reinforcing the view that heavyweight investors have re-entered the commodity scene. Combined aggregate trading volume on the Shanghai Futures Exchange and the Dalian and Zhengzhou Commodity Exchanges jumped by 27% during 2016 to 4.1 billion contracts. At the same time, turnover rose by 30% to a record 177.4 trillion yuan (US$25.5 trillion). Trading volume in Chinese commodities futures has been heaviest in the world for seven years straight. The data confirms rising demand from China has been the main driver behind the rebound in commodity prices. Iron-ore imports rose by 7.5% to a record +1-billion tons, while copper imports rose by 2.9% to a record 4.95 million tonnes. Indications are that base metals, zinc (up 88%) and copper (up 33%) in particular, will perform well again in 2017. Data last last week also shows that China saw its producer price index (PPI) rise by 5.5% in December, its fastest pace in more than five years - another very positive indicator.
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).