Balloch recants view of super cycle, says China will drive recovery

Dec 04, 2008 | 07:54 AM | Michael Cowden

It's time to eat humble pie for experts who earlier this year predicted a commodities super cycle was sustainable.

Howard R. Balloch, president and founder of the Balloch Group, Beijing, and a former Canadian ambassador to China, is among the first to admit he was wrong.

"I didn't predict the collapse in the global economy, and I talked about the super cycle and why I felt the super cycle was sustainable, largely on the back of China," he said at the Thomas Weisel Partners LLC Natural Resources Conference in New York.

And Balloch acknowledged that almost everyone expects 2009 to be a rough year for much of the world. Growth in China could fall this quarter and slow to as little as 5.8 to 6 percent in the first quarter of next year, he said, but predicted a comeback by the second quarter.

Future growth coupled with current cutbacks could push oil to $150 per barrel within three years, Balloch predicted. In fact, one danger overshadowed by the current economic downturn is the "terrific volatility in prices" that could accompany an upturn because of supply reductions being put in place now, Balloch said.

"The Chinese will not let their economy slow for long," he said, "and the economy is large and separate enough that the stimulus package they promised will have an impact on Chinese demand in a significant way. And that demand will add to the overall growth in global demand."....