There's no doubt that China has been the biggest story in commodities over the past decade.
Chinese demand has driven prices for everything from copper to coal to kaolin. But recently some other interesting factors are emerging globally in these markets.
In the coal space, for example, China no longer dominates. With the rise of India as a coal importer making the upstart nation a serious force. Perhaps even one that will soon outstrip Chinese demand.
And news last week suggests that India continues to shake up commodities markets. With events here having a major effect on the supply-demand equation worldwide for at least one key metal.
That's iron ore. Where reports suggest that critical events in Indian politics may be playing a big part in trading. And not just in India itself--but also in heavyweight iron consumer China.
Platts reports that Chinese iron ore buyers have been watching the recent national elections in India closely. Believing the outcome could have a significant effect on their buying going forward.
That's because of India's iron ore exports. Lately, such shipments have dwindled to nearly nothing--with only 14 million tonnes exported in 2013. Down from 100 million tonnes in 2011.
But China's consumers believe that could change. With newly-elected Indian Prime Minister Narendra Modi seen a reformer--who could change key policies to spur exports. Most notably, a removal of export taxes on iron ore that has been the major driver for falling shipments the last few years.
Believing change could be coming, Chinese iron buyers have reportedly been delaying purchases. Waiting to see how things play out in the Indian markets before they commit their cash.
That puts an interesting spin on recent trends in iron ore prices. Which have fallen of late--dropping below $100/tonne last week, down from nearly $140 in late 2013.
But the news on China suggests this may simply be a calculated lull in buying. Rather than a collapse of demand. If so, prices could rebound quickly once traders get a read on Indian policy and renew their purchases.
Could end up being a very good buying opportunity.
Here's to having an iron will,
By Dave Forest