- China says it will buy an additional $95 billion worth of commodities from the US as a boost to the phase one trade agreement, but doubts still lurk in the market.
- In phase one trade deal, China never specified the respective quantities of crude oil, cereals, and natural it would buy, leaving room for speculations.
- Most prices for the raw materials that were captured in the deal dipped on Wednesday.
China says it will buy an additional $95 billion worth of commodities from the US as a boost to phase one trade agreement. But doubts still lurk in the market.
Most prices for the raw materials that were captured in the deal dipped on Wednesday, as Bloomberg Commodity Index dropped 0.4%.
According to traders, the only way for markets to realise real gains would be to see an increase in shipments. The pessimistic comment came after the White House issued a statement saying farmers and producers would benefit from the deal.
As the official election date nears, President Donald Trump is expected to wow the farmers’ faction, in a bid to boost his re-election chances after months of the China-US trade war. But in the trade one deal, China never specified the respective quantities it would buy of crude oil, cereals, and natural, leaving room for speculations.
“Signing the deal is the easy part. I have yet to hear a sound argument on how China will execute this deal,” Ken Morrison, a St. Louis-based independent commodity trader said.
Before the trade war, the US exported an average of $22 billion worth of commodities to China.
China pledged to purchase $32 billion in additional commodities over the next two years and further promised to buy $10 billion more agricultural imports from the US. These include cotton, cereals, oilseeds, ethanol and meat.
American energy commodities also got a boost after China promised to increase purchases including LNG, crude oil and coal over the next two years.
But the trade document that was signed on Wednesday in Washington never captured the quantities for the energy commodities either. Additionally, the deal also never touched on retaliatory duties imposed on US products including LNG, Soybeans, and oil.
“There’s not enough clarity as to how they are going to do it. It’s just big numbers thrown around,” a Bloomberg Intelligence analyst, Fernando Valle said.
The US LNG sector right now is undergoing an oversupply, and a Chinese market could significantly boost prices. For months now, the Asian giant hasn’t purchased a single barrel of American heating and power-plant fuel.
American producers and farmers are now a worried lot due to the uncertainty. The National Farmers Union, a body, made up of about 200,000 American farmers, in a statement said: “Without more concrete details, we are deeply concerned that all of this pain may not have been worth it. Given the numerous deals that have been reached and then breached in the past two years, we are also sceptical.”