Status on the CRB Index

Just recently, sentiment in the commodity market has been positive. Capacity utilization improved, the CRB index started to move upwards, chances on QE3 are improving, the dollar index moves into a top formation. In this article I will discuss the prospects in each sector of the CRB index.

On Tuesday 17 July 2012 the capacity utilization rate came in at 78.9%, up from 78.7% the previous month. As I noted here, the capacity utilization rate is a leading indicator for inflation. This inflation will start to be visible next year as there is a lag between the capacity utilization rate and commodity prices.

The different sectors in the CRB index composition are: petroleum, agriculture, metals and natural gas. I will analyse them one by one in this article.

Chart 1: CRB Index

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Is China Slowing Down?

These days, many commodity investors are living in uncertainty because they read on the internet that China, the largest consumer of commodities in the world, is slowing down. In this article I will take a look at the most important commodities consumed by China. We will see if our concern about China slowing down is validated.

China is already the world's largest consumer of the main industrial metals copper, nickel and zinc. In the energy space, China is the largest consumer of coal in the world. In construction, China is the largest cement (+ ceramics and plate glass) consumer in the world. In the precious metals industry, China is the largest gold and platinum jewelry consumer in the world. Indeed, a slowdown of China will have a large impact on commodity prices.

In the full version of this article I will go through the commodities listed above and we will see that China is indeed slowing down.

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