Goldman Says Chinese Commodity Financing May Unwind in 24 Months
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Financing arrangments in China using commodities from copper to rubber as collateral to obtain credit may be unwound in 12 to 24 months, driven by increased yuan volatility, Goldman Sachs Group Inc. said.
As much as 1 million metric tons of copper and 30 million tons of iron ore could be released if the deals unwind, the bank said in a report today. The unwinding would be bearish “given relatively limited physical liquidity to absorb the shock,” analysts led by Jeffrey Currie wrote. For now, the deals remain profitable and an “abrupt government crackdown” on them is unlikely given the potential effect on the country’s economic growth, they wrote.