Commodity demand will rise in China: Goldman Sachs

SINGAPORE: Commodity demand in China, the world’s largest user of iron ore, copper and tin, will rebound through the end of the year as infrastructure projects gather pace and users restock, according to Goldman Sachs Group.

The key demand driver is infrastructure and fixed-asset investment , analyst Julian Zhu told reporters in Singapore on Thursday. Steel prices in the world’s largest producer were seen higher through the end of December, Zhu said.

Goldman’s assessment adds to signs that a slowdown in the second-largest economy may be ending, lifting the outlook for commodities from iron ore to base metals. While Premier Li Keqiang said on Wednesday that the foundations of a recovery aren’t solid, policy makers have signaled that they will defend a 7.5% expansion goal for 2013. Bank of America Merrill Lynch on Thursday raised its growth forecast for China.

“From now till the end of this year, we anticipate China demand for commodities to continue to recover,” Zhu said. “The current commodities inventory in China is still quite low and with the further demand rebound, we should see the ongoing restocking to continue as well.”

Commodities as tracked by the Standard & Poor’s GSCI Index of 24 raw materials are little changed this year, after advancing in July and August. Iron ore with 62% content delivered to the Chinese port of Tianjin rose 0.1% to $135.20 a tonne on Thursday, up from this year’s low of $110.40 in May, according to figures from The Steel Index.

Data this month showed industrial production beat estimates and manufacturing resumed growth, signaling that the economy is strengthening after a two-quarter slowdown.