HSBC Global Viewpoint
Under the Banyan Tree - If China's slowing, what's driving commodities?
Sep 14, 2023
The podcast discusses the factors driving high commodity prices despite China's slowing growth, including supply constraints from under-investment in fossil fuels and agriculture. It also explores the challenges of transitioning to renewable energy, the impact of erratic weather on global agriculture, and the structural changes in commodity markets.
18:04
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Quick takeaways
- Commodity prices remain high despite China's slowing growth due to supply constraints caused by the energy transition, underinvestment in fossil fuel capacity, and the impact of climate change.
- Oil prices are sustained at around $90 per barrel due to constrained supply from reduced investment in fossil fuel capacity and OPEC's disciplined reduction in supply, rather than demand factors.
Deep dives
Commodity Prices Remain High Despite China's Growth Slowdown
Despite China's economic growth slowing down to approximately 5%, commodity prices have remained resilient. Although commodity prices have come down from their peaks, they are still 50% higher than pre-pandemic levels. This can be attributed to supply constraints caused by the energy transition, underinvestment in fossil fuel capacity, and the impact of climate change. Global growth is expected to slow, but commodity prices are not expected to decrease sharply due to the limited supply relative to the demand for materials needed for the energy transition.
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