China’s army of commodities investors has racked up an unprecedented volume of bets on steel futures, raising the prospect of a sharp retreat if market conditions weaken.
Open interest on the Shanghai Futures Exchange’s steel reinforcement bar contract surged to a record 2.82 million lots on Monday, according to bourse data, with each lot representing 10 tonnes of metal. That’s more than double the level at the start of the year, with investors piling up positions in the past two weeks as prices rallied amid renewed optimism on demand. Rebar’s benchmark October contract returned to a bull market on Monday after rising more than 20 per cent from this year’s low in mid-April.
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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.
