Industrial slowdown in China a headwind for prices

The prices of most industrial commodities held up fairly well this week. However, the slowdown in broad credit growth and the fall in volume terms of China’s imports of industrial commodities in May suggests that commodity demand there is coming off the boil. This chimes with our view that industrial commodity prices will fall later this year as demand growth in China weakens even further. Turning to next week, the key data release for commodity markets will be China’s May activity and spending data (Wednesday). We suspect the data will show further evidence of an economic slowdown, which should weigh on commodity prices. Meanwhile, we expect the Fed to keep its policy settings unchanged at its meeting next week, but if the Fed continues to push back on market expectations for earlier rate hikes, then the US dollar could depreciate which could put a floor under prices.