With state banks more reluctant to lend at regulated interest rates, and private lenders charging rates as high as 15percentt, companies that built up commodity inventories in the hope of beating inflation are now drawing them down.
According to Dylan Grice of Société Générale: "[Chinese] banks which haven't wanted to lend have lent to borrowers who didn't want to borrow…the money is now flowing into the stockmarket, into commodity inventories and into property".But bubble talk seems a little premature.
As in past commodity cycles, inventories will move quickly from low to excess levels as demand falls and production is not curtailed rapidly.
Randomly generated instances for two special cases of our model, i.e., the single-sourcing UPL&TAP and the single-sourcing multi-commodity location-inventory model, are provided to test our algorithm.
In commodities, the weekly inventory report on crude oil inventories comes out after the start of trading, and investors are already cautious after OPEC said Tuesday that demand for oil would wane next year.
Is it harder for a chemical corporation like Monsanto to borrow because their credit is based in part on the value of their inventory, commodities, which has also declined?
"Enormous cash flows from high commodity prices, limited 'opportunity inventories' and lower valuations for small-capitalization domestic E.& P.'s and Canadian independents lead us to believe that the consolidation trend should accelerate," William Featherston, an analyst at UBS Warburg wrote in a note to investors.
With supply limitations and strong demand from commodity users and investors, inventories of many commodities are quite low relative to production and demand.
Railroad car loadings are fading fast as the recession bites into industrial production, inventories and commodity shipments.
Futures markets have flourished and become important in commodities where sizeable inventories have to be stored and carried forward for meeting the consumption needs of the entire season.
