CS: China steel rocket is no bubble

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From Credit Suisse:

Futures bubble argument looks flawed

Our team has been positive but cautious since March, but is now trending increasingly towards the latter view that there is real demand driving the steel prices, and steel is leading iron ore. The key argument for the speculative view is that a bubble has inflated in futures markets and driven up physical prices. But as steel futures are lagging spot prices (Figure 1), that contention seems flawed. It looks more like spot prices are surging ahead and that suggests buyers of physical steel are finding a tight market.

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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.