LAUNCESTON, Australia: Commodities joined the general relief rally after Greeks voted narrowly to support pro-bailout parties, but any sustained gains will depend on risks abating over Chinese demand and Iranian crude supplies.

While it is undoubtedly positive for Europe and for risk assets that Greece is now far more likely to stay in the euro, it would be a big call to say that the weekend election does much to solve the continent’s underlying problems.

The main risk for markets is that once again the can gets kicked along the road, delaying for several more months the steps necessary to put Europe’s economies backs on a sounder footing.

Despite gains of as much as 1.9 percent in Brent crude and nearly 1 percent in Shanghai copper, the likelihood is that Greece’s victorious parties will form a weak coalition that will face substantial public opposition to the fiscal austerity that comes along with the 130 billion euro ($ 164 billion) bailout.

All that the recent vote has accomplished is to remove, for now, the worst-case scenario of a chaotic Greek departure from the euro.

While this temporarily lifts a reason to go short on commodities, it does little to alter the fundamental supply and demand picture.

It is for this reason that data out of China will be far more important over the next few months, with the authorities aiming to boost the economy through bringing forward infrastructure spending.

This should be positive for many commodities, including oil, copper, iron ore and coal, and the next indicator to keep an eye on will be the HSBC flash purchasing managers’ index for June.

Any sign that China’s manufacturing sector is returning to growth will be a boost, although the chances are that the impact of the stimulus will only be felt by the last quarter of 2012, and the next several months will continue to paint a mixed picture of economic activity.

It’s worth bearing in mind that the mixed signals from China include commodity imports that have been way more robust than expected.

Crude imports reached a record in May and are 11.1 percent up in the first five months of this year over 2011, while copper imports in May were 65 percent above the year-earlier month.

Given steel is one of the commodities most exposed to slowing construction and manufacturing, it would be logical to look to iron ore imports for signs of weakness.

However, these are up 8.9 percent in the first five months over the same period last year, so far beating a Reuters survey of analysts that forecast a 6 percent gain over the whole of 2012.

In oil, the International Energy Agency expects world demand to grow by 820,000 barrels a day this year, but so far in 2012 Chinese demand alone is growing at about 575,000 barrels a day.

Even though oil demand will likely slip in Europe and remain flat in the US, China’s growth in demand doesn’t leave much room for the rest of the world to increase its consumption if the IEA forecast is proven correct.

If one takes a stand back look at commodity demand so far this year, it’s hard to avoid the conclusion that China’s appetite has been remarkably resilient, and may remain so given the expected infrastructure stimulus now in the pipeline.

Demand in the developed world has been less impressive, but is still far from being the disaster associated with recessions.

So, why have commodities been the cellar dwellers of asset classes so far in 2012?

It comes down to risks, namely the risk of a disruption to global oil supplies from Western financial sanctions against Iran’s nuclear program, the risk of a sharper-than-expected Chinese slowdown and the risk of a meltdown in Greece and the euro zone.

So far all of these have remained just risks, but the key point here is that they all remain risks at the present time.

However, the severity of the risks has been easing in recent weeks, with signs the world can cope with any loss of Iranian crude, better than expected commodity demand in China and now, the least worst of all outcomes in the Greek elections.

It’s probably not enough to build the case for a rally in commodities, but it may be enough to remove the reasons for further declines.

— Clyde Russell is a Reuters market

analyst. The views expressed are his own.