Copper’s reputation held as China industrialised and became the world’s biggest consumer of the metal. Indeed, a crash in copper prices in January 2015 raised concerns among investors about a slowing in the world’s second-largest economy.
This year, however, copper’s antennas appear less reliable. Despite Beijing trying to turbocharge the economy with credit, the copper price is only up about 5 per cent to $4,700 a tonne, even though it is widely used in construction and property.
By contrast, prices for steel and iron ore have jumped more than 40 per cent. And coal prices have outdone that with coking coal, which is used in steel, having more than doubled on the Dalian Commodity Exchange.
So which commodity is sending accurate signals about China’s growth? Yvonne Zhang, director of metal products at CME Group in Singapore, says there are good reasons why coking coal and scrap steel may be better barometers of the Chinese economy right now.
For one, they are consumed quickly so reflect immediate demand unlike copper which does not corrode so it can be easily parked in a warehouse.
Strong imports of copper into China this year was not all consumed but was left in stockpiles that are still weighing on the price of the metal.
That has sent China’s retail investors into steel, iron ore and coal futures. This year the daily trading volumes in iron ore futures have averaged $7bn, according to Goldman Sachs.
Copper also has a weak correlation with the so-called Li Keqiang index, a popular barometer of China’s growth based on remarks by China’s premier that he follows electricity production, rail shipments and total credit growth as good indicators of China’s growth rather than gross domestic product figures.
Since January 2012, the three global copper futures (on the London Metal Exchange, Shanghai Futures Exchange and CME) have had a positive correlation with China’s CSI300 equity index but a negative correlation with the Li Keqiang index, according to Ms Zhang.
YDNEY (Reuters) - The first cross-border transaction between banks using multiple blockchain applications has taken place, Commonwealth Bank of Australia and Wells Fargo & Co said on Monday, resulting in a shipment of cotton to China from the United States.
Australian cotton trader Brighann Cotton Marketing bought the shipment bound for the port city Qingdao from U.S. division Brighann Cotton in Texas, the companies and their banks said in a joint statement. The blockchain trade, for 88 bales, totalled $35,000, Commonwealth Bank told Reuters.
Blockchain is a web-based transaction-processing and settlement system whose efficiency banks say could slash costs. It creates a "golden record" of any given set of data that is automatically replicated for all parties in a secure network, eliminating any need for third-party verification.
"Existing trade finance processes are ripe for disruption and this proof of concept demonstrates how companies around the world could benefit from these emerging technologies," Michael Eidel, Commonwealth Bank's executive general manager for cashflow and transaction services, said in the statement.
The transaction is not the first involving the decentralised database, used since 2009 for the digital currency bitcoin. But it is a milestone for the traditional banking industry which at first shied away from the technology, partly because it makes money flows harder for law enforcement agencies to track.