A new ingredient has entered the global financial crisis, and it isn't good news, and the catalyst is China's weakening real estate market. العيد الوطني
If China's real estate situation worsens, the International Monetary Fund in Washington, DC, predicts a 2.7 percent reduction in world zinc and metal prices this year.
China's property sector, according to the IMF, is the largest consumer of industrial metals. That's why even a 2% slowdown in China's real estate market might have an impact on worldwide prices.
According to the IMF, China's economic growth fell to 7.6% in the second quarter, the worst rate since 2009. Metals could fall 2.7 percent year on year if property investment falls by 2%, with zinc falling 4.3 percent, nickel 3.7 percent, lead 3.2 percent, and copper 3.1 percent.
"The impact on overall metal prices might endure four quarters, with lead and zinc prices lasting up to five to six quarters," the IMF warns. The International Monetary Fund (IMF) published its results on its website.
According to Bloomberg, The IMF's report comes after Beijing's official Xinhua News Agency said on July 20 that it would not lift limits on home purchases and would maintain a "strong grip" on the market to prevent house prices from rising again.
According to China's National Bureau of Statistics, home prices grew in the most cities recorded by the government in 11 months in June. In 25 of the 70 cities that the government monitors, prices increased from the previous month, the most since July of last year.
According to the IMF, "a disorderly collapse in real estate investment might have substantial ramifications for growth in China and the world economy."
According to China's statistics department, property investment accounted for a quarter of the country's total fixed asset investment, which was $2.4 trillion in the first half of 2012.
Nickel is down 15% this year on the London Metal Exchange, while lead is down 8.4%, tin is down 8.3%, aluminum is down 6.8%, copper is down 1.9 percent, and zinc is down 1.6 percent, according to Bloomberg. This year, the LMEX index, which measures the performance of industrial metals traded on the London Stock Exchange, is down 5.1 percent.