As per Goldman Sachs, China is no longer at the center of commodities pricing. It stated that the pace of demand recovery in developed markets provide a clear idea that western consumers have crowded out Beijing as a buyer.

The bank recently stated that the neither the Chinese speculators nor the Chinese demand growth are covered under the bullish commodity thesis. It rather focuses on scarcity and the DM-led recovery.

Sources stated that owing to Chinese warnings over onshore speculations, the commodity prices fell. However, in H2, orientation towards incremental tightness is the fundamental path in major commodities such as oil, copper, and soyabeans. There is also a lack of sufficient evidence of a supply response which could derail this bull market.

This can also be seen in the market because instead of their Chinese counterparts, copper prices are increasingly influenced by western manufacturing data.

Goldman said that this is a change in roles from the bull markets of 2000s as China is now the mandatory consumer as US was when marginal US consumers were squeezed out by emerging Chinese demand. China leads the global market for copper, coal, and iron ore.

China’s cabinet also recently stated that Beijing would take care of the unreasonable hike in the prices for copper, steel, coal, and iron ore.

Due to the reduction in covid-19 lockdowns and the government stimulus, consumers have boosted their global spending. As a result, the commodities, of which China is the biggest global user have surged this year.

As per Goldman, US has a greater pricing power because it has a large fiscal stimulus which China does not possess. Additionally, China no longer receives much benefit from its comparative advantage in low-cost labor and global trade.