Worries about downside for commodity prices on China slowdown a little overdone

China's slowdown has of course been a powerful headwind in commodity markets for many years, notably for industrial metals. 

The growth rate of China's economy has already halved since 2007, from over 14% to around 7%. What's more, this slowdown has been the main reason why the prices of many commodities have performed so poorly since 2011. 

But now that these adjustments have taken place, worries about the downside for prices if China slows a little further seem overdone. 

Capital Economics notes in a report on Monday:

• Admittedly, the rebalancing of China's growth away from investment towards consumption and labour-intensive services should reduce the commodity-intensity of activity. The large overhang of unsold homes also suggests that construction demand will stay weak. 
  
  
• But while the shift away from heavy industry may continue to undermine some commodities, such as coal, a brighter outlook for the household sector will be positive for others, such as gold. 
  
  
• What's more, the prices of key industrial metals, such as copper, have already fallen by around 40% from their 2011 highs. This leaves plenty of room for a decent recovery if, as we expect, the markets' fears about China are proved wrong.