Our studio guest: Christine Schweikert, commodities expert

Christine Schweikert is commodities expert at BHF Bank. DW-TV: How bad is the market right now for commodities and raw materials? Christine Schweikert: Well, I think it's relatively bad, and I think it's going to stay bad for quite a while, because we believe we're not going to see a V-shaped recovery or a U-shaped recovery but rather a long, bath-tub-type recovery. DW-TV: A bath-tub recovery? Christine Schweikert: Crawling on the bottom. Stagnation rather than any type of bouyant growth. DW-TV: Let's look at the numbers right now and talk about how bad it is. You can see that last summer a ton of copper sold for 8,000 dollars. By December it had sunk to 2,700 dollars. That's really the low point for the last 12 months. Now we're seeing copper for about 4,000 dollars. This looks like it could be a recovery. Is it? Christine Schweikert: It's quite an astonishing rebound, really. It's not matched by the fundamental picture of demand and supply on the copper market. I think it's mainly a response to very high demand from China. China has been importing copper to a very large extent - restocking, which is more or less normal, but also building up strategic reserves, very probably using relatively low prices to stock up for the future. DW-TV: You talk about building up reserves. But how artificial is this demand? There's demand when you're using copper and there's also demand when you're building up reserves. It can give the market a false impression, can't it? Christine Schweikert: I think we're seeing a false spring. There is some actual demand, because the stimulus programmes are being invested in infrastructure, where you need copper for building. But that's a relatively small part. It's mainly stocking up for the future, and after a while you've stocked up and you stop. DW-TV: What you're saying is incredible. That China's demand for reserves is greater than what all the other countries have done in their stimulus packages. That's saying a lot. Christine Schweikert: Stocking up the copper reserves is not necessarily connected to the stimulus programme. It's more a question of diversifying reserves. China has a lot of reserves in dollars, and there's been the consideration of whether we want all this money in US dollars or do we maybe spread out a little. Commodities is one area where they've been thinking for a while: why not stock up? And copper's relatively easy to store. Easier than oil. DW-TV: There were a lot of people watching the commodities markets who thought that we were going to see greater demand because of the stimulus packages. Have they been disappointed? Christine Schweikert: On the other hand, private demand has gone down. Copper is used in electronics in transport, residential building etc. Private demand has gone down a lot. We've got a bit of an uptake from the stimulus programmes, plus you've got supply, which has not come back quite as much as it should have. So you've got very soft demand and relatively high supply. DW-TV: Let me ask you briefly. Stock markets are rebounding slightly, and the stock market is normally ahead of the economy. Where do commodities fit in when we're talking about a rebound? Christine Schweikert: They are also leading indicators, but you must take account of those special factors. This is connected to the uptake in optimism, and the indicators are a bit better than they used to be. DW-TV: Let's hope the optimism continues. (Interview: Brent Goff)

DW-World | May 5, 2009

Tags:. .uptake. .restocking. .sunk. .astonishing. .copper