Bangkok--3 Jun--Standard & Poor's
It would be difficult to overstate the significance of China's presence in the global commodities markets. In recent years, China has emerged to become one of the leading consumers of a broad range of commodities.
"Among emerging economies, we believe China--given the combination of the size of its economy and the steep slope of its growth trajectory--has had a far more significant role in driving appreciation of commodities prices than any other country," Standard & Poor's Ratings Services credit analyst Scott Sprinzen said in a report published earlier today on RatingsDirect on the Global Portal.
With commodities prices having been at or near record levels earlier this year, and subsequently subsiding only modestly, Standard & Poor's is naturally concerned that the current situation represents an unsustainable bubble, subject to a sudden correction.
Market bubbles inevitably burst, although they are much easier to recognize in hindsight. And if current market conditions in commodities do represent a bubble, a significant deceleration or downturn in China and other emerging economies could ultimately cause the rupture.
"Indeed, the modest subsidence of prices over the past two months is partly attributable to market expectations of slower growth in China," Mr. Sprinzen said in the report, titled "The Potential Risk Of China's Large And Growing Presence In Commodities Markets."
Standard & Poor's expects that China will sustain high growth rates over the next few years, albeit perhaps not as high as in the recent past. However, said Mr. Sprinzen: "We also recognize that China's growth could slow more markedly at some point.
"We believe that any sudden and severe economic deceleration in China would cause distress in the commodities markets, forcing prices downward and leaving companies with excess supply and production capacity that the more-developed economies couldn't pick up."
The report is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-7280 or sending an e-mail to
[email protected]. Ratings information can also be found on Standard & Poor's public Web site by using the Ratings search box located in the left column at www.standardandpoors.com. Members of the media may request a copy of this report by contacting the media representative provided.
Media Contacts:
John Piecuch, New York (1) 212 438.157,
[email protected]
Mimi Barker, New York (1) 212.438.5054,
[email protected]
Analyst Contacts:
Scott Sprinzen, New York (1) 212-438-7812
Suzanne G Smith, Mumbai (91) 22-3342-1911
KimEng Tan, Singapore (65) 6239-6350
Fred Ferraro, New York (1) 212-438-7144
Christopher Johnson, CFA, New York (1) 212-438-1433
David Tesher, New York (1) 212-438-2618