Monday July 28, 2008

The big Beijing 2008 Olympics China shutdown - commodities fall only temporary?

news.yahoo.com :

Beijing's Olympic shutdown begins Sunday [20 Jul 2008], a drastic plan to lift the Chinese capital's gray shroud of pollution just three weeks ahead of the games. Half of Beijing's 3.3 million vehicles will be pulled off the roads and many polluting factories will be shuttered. In a highly stage-managed Olympics, no challenge is greater than producing crystalline air for 10,500 of the world's greatest athletes.

- Earlier on, I was wondering aloud whether the shutdown of the massive Chinese industrial juggernaut might have something to do with the recent commodity meltdown, especially in crude oil, that had much of the world breathing a sigh of relief after helplessly watching prices nearly triple to $147.27 from $51 back in Jan 2007. Evidently, other people were also thinking the same thing :

seekingalpha.com :

Oil got denied when it almost tapped $150 and dived to $123, taking down the rest of the commodities world - metals, agriculture, coal, you name it. Sure, maybe it's the speculators the regulators have now caught, or maybe it's money coming out to chase the banks off their lows. But: What if it's because China has halted a big chunk of its manufacturing to clear the air for the Olympics ... just thinking what will happen starting September, when the Olympics are over, and the China manufacturing beast roars to life again? Devouring commodities for breakfast, lunch, dinner, and a midnight snack 7 days a week ...

- If, like they say, in a tight supply situation, all pricing occurs at the margins, the marginal decrease and, later, subsequent increase in demand in Chinese demand could just be the factor that tips the balance in either direction. If true, the commodities selldown could only be temporary, notwithstanding the American economic slowdown. Remember that the US economy has been slowing down for months, but the way commodities fell, it was like some giant switch was thrown. This massive China shutdown could have been that giant switch. Come Sep 2008, when the Beijing Olympics 2008 winds down, we'll get to see if this hypothesis is right.

(2008-07-28 23:39:08 SGT) [Energy] Permalink

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