Category: Fundamentials

The growth of the Chinese economy has been nothing short of amazing. The growth rate has been around the 10% annual rate level for the past several years.

This high rate of growth has fueled a massive demand for industrial commodities.

According to the International Monetary Fund from 2002-05, China accounted for 48% of the increased demand for aluminum. This means that China alone absorbed 48% of the increased world production of aluminum over this time period.

Take a look at the short table below, which shows the percentages for other commodities:

Aluminum, 48%
Copper, 51%
Lead, 110%
Nickel, 87%
Steel, 54%
Tin, 86%
Zinc, 113%
Oil, 30%

Clearly as goes China so goes the market for many commodities, When you trade commodities today you had better keep a watchful eye out for how well the Chinese economy is performing.

Any pronounced slow down in China’s rate of economic growth would cause a rapid decline in commodity price levels, especially in industrial commodities.

Do you want to multiply your money fast?

No problem. Just move to India and collect one rupee coins, melt them down and convert the metal into razor blades.

Indian coins are worth up to 35 times as much as razor blades as they are as coins. This leaves a huge profit margin for those involved in the illegal business of melting down coins.

As you might expect illegal or not such profit margins attract a lot of interest. Coins are in short supply in many parts of India.

Originally, the Indian coins were smuggled into Bangladesh and then melted down and turned into razor blades. More recently enterprising Indians have themselves been melting the coins down and then smuggling the finished product into Bangladesh.

The boom in commodity metal prices caused by rapid growth nations like China and India have caused similar problems for governments in other nations.

Copper is salvaged from melted down stolen telephone lines. Metal manhole covers are stolen from city streets and sold as scrap metal. Cast iron water pipes are ripped from roadways.

As long as huge profit margins remain from such activities the authorities are going to be hard pressed to stop the illegal practices.

This is not only true in countries, like India, that in spite of rapid economic growth still has hundreds of millions of citizens living in poverty, but in developed countries, like the United States, that has a surprising number of homeless and low income people trying to survive one way or the other.

The US Government Energy Information Administration (EIA) releases monthly statistics about the importation of crude oil into the United States.

The statistics make for some interesting reading. I bet most folks in the US don’t realize how important Canada and Mexico are to our oil importation needs with Saudi Arabia as a strong number three.

Even with all of the troubles in Iraq it is in the number six position. That may help to explain why George W Bush, oil man that he is, has such a strong interest in spreading freedom and democracy to that embattled nation.

Information taken from the EIA website follows:
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Top 15 Countries
April 2007 Import Highlights: Released on June 22, 2007

Monthly data on the origins of crude oil imports in April 2007 has been released and it shows that three countries have each exported more than 1.40 million barrels per day to the United States.

Including those countries, a total of four countries exported over 1.00 million barrels per day of crude oil to the United States (see table below). The top five exporting countries accounted for 68 percent of United States crude oil imports in April while the top ten sources accounted for approximately 88 percent of all U.S. crude oil imports.

The top sources of US crude oil imports for April were
Canada (1.909 million barrels per day),
Mexico (1.460 million barrels per day),
Saudi Arabia (1.458 million barrels per day),
Venezuela (1.182 million barrels per day),
and Nigeria (0.891 million barrels per day).