Commodities, hard and soft, are enjoying a blistering rally, with the red-hot S&P World Commodity Index up by 64 percent on the backs of rising demand as lockdown curbs ease across the world. China, which is the biggest commodity user in the world, has now warned industrial metal companies to maintain "normal market order" in a step to quell the rally.

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Last week, China government released a statement saying that it will work to ensure the supply of commodities, stabilize prices, curb unreasonable price hikes, and prevent passing the hikes to consumers.

The last bit is particularly important. In the entire manufacturing and construction value chain, aluminium, copper and steel are extremely important pivotal commodities.

However, since this announcement, commodity prices have seen a bit of a dip. Despite the pullback though, the last one year prices are up quite a bit — Copper is up 85 percent, Zinc is up 49 percent, Aluminium is up 60 percent, Nickel is up 40 percent, Lead is up 30 percent, and Iron Ore is up 121 percent.

This begs the question — Can China really cap commodity prices? And if so, how?

CNBC-TV18's Prashant Nair, in a conversation with Rohit Srivastava, Founder and Strategist of Indiacharts.com, sat down to discuss whether China can deflate the commodity rally.

But what could China really do?

More and more Chinese leaders are talking of the risk to the economy from rising input costs and pointing to the need to curb prices. But what could China really do? And what it has already done? One thing that the country has already started doing is tightening its credit lines. While it is not yet showing in the global growth numbers, it soon will, with a lag. Read how tight credit in China may deflate commodity prices.

As for what it could do, starting from capping the price rise, China could marginally ease supply control on steel. China's steel price index jumped 9.25 percent to 148.88 by the end of April compared with a month earlier, data compiled by the steel body showed.

The regulators also pledged to strengthen inspections of both futures and spot markets as that could partially affect physical prices, while cracking down on speculative froth.

Watch the video for more

(Edited by : Yashi Gupta)

First Published:May 25, 2021 4:19 PM IST