Commodities hit new record

Missed this one yesterday. From the RBA’s Index of Commodity Prices:

Preliminary estimates for May indicate that the index rose by 2.3 per cent (on a monthly average basis) in SDR terms, after rising by 7.3 per cent in April (revised). The largest contributors to the rise in May were increases in the estimated export prices of coal and iron ore, reflecting the ongoing movement to higher contract prices in the June quarter. Gold prices also rose in monthly average terms, while crude oil prices, base metals prices and most rural commodity prices fell. In Australian dollar terms, the index rose by 1.5 per cent in May.

Over the past year, the index has risen by 29 per cent in SDR terms. Much of this rise has been due to increases in iron ore, coking coal and thermal coal export prices. With the appreciation of the exchange rate over the year, the index rose by 14 per cent in Australian dollar terms.

As indicated in previous releases, preliminary estimates for iron ore, coking coal and thermal coal export prices are being used for recent months, based on market information.

I think we’re looking peaky now. I suspect the next round of coal and iron price contracts will start down, that is if they are completed prior to any further stimulus in the US.

Comments

  1. Wow! What a chart!
    I can’t believe that anybody could look at that chart and think “no bubble here, looks like it’ll be onwards and upwards for the next couple of decades”.
    Yet, that is exactly what the Federal Government did in their budget.
    In the meantime, the CRB Commodities Index is looking very toppy, recently completing a 61.8% fibo retracement of its 2008 decline… a perfect area from which to begin the next big leg lower.

    • I can’t believe that anybody could look at that chart and think “no bubble here, looks like it’ll be onwards and upwards for the next couple of decades”. Yet, that is exactly what the Federal Government did in their budget.

      Its exactly what Treasury thinks.
      Its exactly what the RBA thinks.
      Its exactly what ABARE thinks.
      Its exactly what the Big Four banks think.
      Its exactly what all the investment banks think.

      Onwards and upwards forever. Twenty year boom, guaranteed.

      • Government is fully on board, that’s all you need to know. They are the slowest movers of the herd, as everything is decided by committee. Once they are on board, you KNOW the trend is about to change.

    • What! No Gravy!

      Don’t want to rain on your parade but note that they start this price series during a commodities bear market. That is not to say that prices aren’t frothy but the “baseline” is not reliable IMO. If you look at other periods of large scale industrialization prior to 1983 you see similarly high commodity (iron ore, coal, base metals) prices.

    • Spot on AC, and a parabolic move like this always has a correction, but when.

      Other point here is the role coal plays in the economy, and why the carbon tax is a sham. Stop exporting coal Julia, and we’ll believe you. Not going to happen, and we’ll get the tax.

  2. Another blindsider. One cannot look at the graph above without knowing the actual unit volume per sector of minerals exported. Currency (toilet paper (Aud$) or basket of mixed roll toilet paper (SDR) can often be misleading creating a “tromp l’oeil” effect. One is hard data, the other is highly variable.

    Be careful.

    Of course the:
    Its exactly what Treasury thinks.
    Its exactly what the RBA thinks.
    Its exactly what ABARE thinks.
    Its exactly what the Big Four banks think.
    Its exactly what all the investment banks think.

    are delighted. The Chinese money flows into Australia are captured by these people, first capture advantage. Glenn down at the RBA would like you all to know that you should be delighted as well.

    Why? Our own first among equals, $1M+ Glenn will not be taking any paycuts. Neither will the other 2 million public servants throughout the land.

    Just like good economists they will look for substitutes. YOU.

    In QLD alone there are 230,000 public servants on the payroll consuming $16,221Millions of the private sectors money. There are 167,000 Federal public servants. And on it goes.Don’t start me on quangos and outsourcing.

    The only thing between you and debt peonage is the Chinese peasant.