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Traders turn to TomTom for clues on China's commodity demand amid virus outbreak

Singapore

TIMING it right on China's commodity recovery promises to be hugely profitable.

But traders are finding the channels of information they need to make that call are getting choked off by travel bans and other steps to combat the coronavirus. So they're relying on unorthodox sources like road congestion data to give them an edge.

TomTom's live traffic updates give an indication of how quickly different parts of the world's biggest consumer of commodities are returning to work after an extended Lunar New Year holiday ended on Monday.

Traders are on alert after President Xi Jinping ordered nearly all of the country to start work again, sparking debate about when they need to start buying again to meet the potential demand surge. As well as parsing traffic data to make their predictions, they're scouring social media, keeping an eye on local news reports and decoding government statements, according to conversations with traders of everything from soybeans to crude oil.

There's a lot at stake. Commodity prices including oil and iron ore have collapsed as the virus dents demand. But when China starts buying again, there could be a significant reversal.

"The trading community is scouring social media, news reports and chatting with each other for information," said Jia Zheng, a metals and energy trader at Shanghai Minghong Investment Management Co. "Sources of information are far fewer than before because of the virus. Some official industry data, which was frequently updated before, has been unchanged for quite a while."

So far the picture is mixed at best. Soybean crushers are ramping up production as the government puts a specific emphasis on the resumption of food production. But oil refineries continue to reduce output, coal demand at eastern independent power plants remains low, and activity at many metals processing plants remains subdued.

Citigroup Inc analyst Ephrem Ravi, who's tracking TomTom's China traffic data, said in a Feb 11 research note that he found "extremely low levels of activity across all regions".

Power consumption data also points to the economic restart not yet materialising, BOCI Research analysts including Tony Fei said in a note on Thursday.

TomTom's Beijing traffic tracker showed congestion at 19 per cent at 8 am on Friday, down from an average of 59 per cent at the time in 2019. "Live congestion data for major cities across China shows roads remaining empty despite the end of the public holiday," Richard Chatterton, an oil analyst for BloombergNEF, said in a Feb 11 report. "Low levels of road congestion indicate lower levels of passenger car journeys that translate into reduced demand for gasoline." BLOOMBERG