Commodity surge wanes on supply rise, construction cuts

The surge in prices of a raft of commodities in the past several months, propelled by China, will probably wane this year thanks to expanded production, according to Bank of America Merrill Lynch.

A sharp rally seen in products from thermal and coking-coal futures to glass and even garlic since mid-2016 showed that China's great ball of excess liquidity had found its way into commodities. Rather than speculative investors, it's good old-fashioned laws of supply and demand that have propelled prices, Helen Qiao and fellow economists at Bank of America Merrill Lynch wrote in a Jan 13 note.

China's commodity consuming property market was still going strong in 2016, with lending and buying curbs starting to kick in only late in the year. On the supply side, policymakers have for some time pressed producers to shut down highly polluting and excess facilities.