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Chinese Demand Driving Commodities Rally: Dow Chemical CEO

China's red-hot economy is fueling inflationary gains in commodities prices, but inflation in emerging markets is nevertheless 'looking manageable" at this point, Dow Chemical

Chairman and CEO Andrew Liveris told CNBC Friday.

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Andrew Liveris
Andrew Liveris

ris, in an interview with CNBC's Maria Bartiromo at the World Economic Forum's annual meeting in Davos, Switzerland, said emerging market inflation was one of three "headwinds" hitting the global economy, which he expects to grow by 3.5 percent this year.

Liveris said Europe's sovereign debt crisis and the unusally weak US economic recovery were the other two obstacles to growth.

The threat of inflation has been a subject of much discussion in Davos, where global leaders are gathering for a week of debate and discussion.

Chinese demand for any number of natural resources—grains, metals, oil and gas—is a major factor in the current commodities rally.

"Depending on the commodity," he said, "They tend to set the global price based on their demand."

In the U.S. inflation "will become [an issue] but not yet," said Liveris. "Manufacturing in the U.S. is close to running at capacity again."

Though that seems unsual given the economy's growth, Liveris said many companies shut factories during the severe downturn of 2008-2009.

Davos 2011 - See Complete Coverage
Davos 2011 - See Complete Coverage

Oil prices , off their recent highs, but still expected to break the $100-a-barrel level, are another key card in the inflationary equation.

"I do think oil prices contunue higher," he said, adding they will "stay higher in the future. "We do need an energy stragety that's fixed to renewables," he added, referring to alternative, renewable energy sources.

Liveris could not discuss his company's financials because it is in an earnings-season quiet period.

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