Were the opening ceremonies for the Beijing games the beginning of the end of the commodities rally? This graphic shows that China’s economic growth took off after the International Olympic Committee gave it the nod in 2001. The commodities boom, based on the Reuters/Jefferies CRB Index, can be traced back to around that time as well.
China went on an unprecedented seven-year construction spree to modernize its cities and infrastructure before throngs of athletes, tourists and media members arrived from around the world, stockpiling raw materials to accomplish its makeover.
Building the Olympic facilities and spiffing up Beijing for the cameras was only a drop in the bucket compared to overall growth in China’s economy, but consider that the spectacular National Stadium, known as the Bird’s Nest, required 45,000 tonnes of steel. Over that time, China became the number one consumer of metals and the number two buyer of oil behind the United States.
No one is expecting China to slam on the brakes when the Olympics end. But even a cooling from 10 percent growth a year to 8 percent should have negative consequences for commodity prices, given that demand from the United States and Europe is withering.