- by New Deal democrat
Back in 2008, I wrote an article called Hoarding in Plain Sight, making the argument that the tightness in oil supplies was crucially augmented by the decision of the Bush Administration to double the amount of Oil secreted in the Strategic Reserve, at the same time as other countries such as China also decided to start their own such storage facilities.
I suspect an opposite trend is in play now. After all, very few analysts are taking the position that China's economy is actually contracting, rather than just growing at a lower rate. If it's still growing, why wouldn't it be using even more commodities, increasing global demand? A change in stockpiling behavior is an answer that fits the data.
Let me give an example. Suppose I am a user of commodity Q. In Year 1 I made use of 1 million tons of Q, *and* stockpile another 250,000 tons. In Year 2, with my economy growing, I make use of 1.05 million tons of Q, but I cut back on my stockpiling to 100,000 tons.
What happens to the "end demand" for Q? It falls. In Year 1, I demanded 1,25 million tons of Q. In year 2, I demanded 1.15 million tons of Q -- a decline of 100,000 tons.
Something like this has happened to the world economy in the last few years. From 2009 through 2013, China wasn't just growing strongly, it was stockpiling all sorts of commodities. Here are some examples:
When metals warehouses in top consumer China are so full that workers start stockpiling iron ore in granaries and copper in car parks, you know the global economy could be in trouble.....China's refined copper imports have surged over 70 percent so far this year to 1.1 million metric tons, while demand from Chinese manufacturers was forecast to rise by up to 7 percent. Meanwhile, iron ore shipments have risen 6 percent, with traders reckoning that local demand growth is much lower.
If you are looking for an example of China's economic slowdown, visit the country's biggest coal port.The huge stockpiles of coal are growing ever higher as factories and power plants cut back.Fuel
China and India [ ] from 2008 to 2013 accounted for 98% of the increase in world coal trade. In the rest of the world, exports and imports of the commodity declined over the same period.