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A note of caution on commodities from one of the world's biggest commodity producers
10/22/2009 8:52 am EST
So when BHP Billiton sounds a note of caution on the staying power of China's commodities buying spree, investors ought to pay attention.
So what's BHP Billiton worried about?
Thanks to heavy buying in the last six months, China has replenished stock piles of key commodities that it had drawn down in the worst days of the global economic slowdown. But now those stock piles are well above normal levels and BHP Billiton is worried that buying will slow down if Chinese companies find out that world demand for their own products hasn't picked up.
It's the same question that I have as I look almost anywhere in the global economy: Has demand really picked up? Or is the increased buying we've seen in markets as different as iron ore and computer chips simply re-stocking of abormally low inventories?
BHP Billiton said that it doesn't know. It sees signs of what the company called stabilization in the world's developed economies. But it also said that it sees little evidence for sustainable demand for commodity metals emerging post-summer in the northern hemisphere.
Only time will tell.
That's a cliche in journalism. But just because something is a cliche doesn't mean it's not true.
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