Citigroup Inc (NYSE:C) forecasts less demand growth in global commodity markets from across the world as the China effect appears to faint. The bank noted that the global demand that was hinged mainly on China’s growth during the 2000s appear to slow down in the forthcoming decade. It will be driven more by India, Middle East, Southeast Asia, Latin America and Africa.
Gap to fill
Citigroup Inc (NYSE:C) stated that the growth from the said regions dubbed as “Emerging 5” will still be inadequate to close the gap created from the slower growth in China. The report came when the commodities slipped to a 12-year low and crude oil recording an 18% fall in 2015. There has been growing incidence of inventories as ten-year-old bull market prompted farmers, drillers and miners produce more while the consumption in China grew at the slowest rate since 1990. The economic transition happing in China coupled with the limited consumption capacity of the emerging markets is responsible for sluggish growth across the commodities, said Citigroup Inc (NYSE:C).
Analysts Ivan Szpakowski and Ed Morse mentioned that the bulk commodities will take the hardest hit following China’s slowdown. Raw materials such as coal, iron ore, and steel will be the most impacted as these commodities have higher exposure to the manufacturing infrastructure and real estate sectors of China. At the same time,
Citigroup Inc (NYSE:C) projected that the oil consumption in both China and the Emerging 5 will decline to 2.7% during 2014-2020, which will further slow down to 2.3% in 2020-2025. The bank wrote some soothing views for base metals and wheat, the consumption of which is expected to increase by 2% and 0.9% respectively. The bank noted that the Middle East will balance the consumption of oil while India will be the biggest driver for coal. Citigroup Inc (NYSE:C) concluded that the gap between the consumption pattern of China and Emerging 5 for base metals will narrow down gradually.