In recent days we seen a number cross-currents in the bulk commodities. On the positive half of the ledger, the spot iron price (white) and 12 month swaps have based (yellow) , as have Chinese steel prices (purple and green). The recovery is quite muted as this point, no doubt reflecting generally weak global economic conditions weighing on a clear shift to stimulate in China. Coking coal too has been stable just under $220. But thermal coal (red) continues to tank, down another 5% last week to $84.81. Thermal coal was a key driver in Australia’s terms of trade boom through 2007/8 and it is still historically very elevated:
Some of the slide is because of weak Asian demand, but its also because of increased coal and LNG supply. There a lesson here for all the bulks in the future.
David Llewellyn-Smith
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.
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Nice to see that data. I heard a China analyst saying a hard landing for China was a 4% GDP growth, and he went through figures to state the case, but what will that mean for commodities? Not as much Iron Ore, but more LNG so I’m trying to remain optimistic.
A hard landing for China six moths ago was 6%. A love the way the goal posts shift. But yes, it’s a good result in the bulks and one main reason I question further rate cuts at the next meet.
Agree. The hard landing goal posts move according to the story that wants to be told.
Personally, I think they’ll cut because we’re likely to see more EU trouble from Italy and Spain before then. However, a watchful eye on US data as well, but if we get QE3 this week like GS think then I think they’ll hold. It’s a guessing game..
Could you please remind me: when did futures trading start for iron ore/coal? Or is it just swaps?
And how have prices performed since then?
A piece by the Aussie Niel Hume who’s the FT’s (ex Alphaville) guy who now is back in Sydney. Pretty good comments and our own Gunnamatta in there with the boot.
“Australia: Mine, all mine”
http://www.ft.com/intl/cms/s/0/f88223fe-b6d7-11e1-8c96-00144feabdc0.html
Little birdy says there are currently some wide scale firings going on in Perth, with a few BHP and Rio mothballed projects having flow on effects to the smaller contract and service companies….