Texture from Reuters:
The yuan depreciation will increase operating costs for Chinese importers, Richard Lu, senior analyst at metals consultancy CRU Group’s Beijing office said.
“Steel mills will likely try to avoid buying iron ore at a weaker yuan level,” he added.
“We have been cautious about iron ore for some time now and continue to maintain that view going into August,” said Edward Meir, commodity consultant at INTL FCStone.
“Weaker Chinese steel rebar prices should have more of an impact just as iron ore supply starts to improve,” Meir said.
Oh yeh. The charts:
Everything smashed. Most disconcertingly, Asia is swimming in Chinese steel and it is piling up in a very unusual and unseasonal way:
Steel production will be curtailed in the Q3 seasonal downturn and iron ore fall much further. Take out any supply issues and the price that these fundamentals suggest is $60 and fading. We will probably see some stimulus to prevent a total rout but it had better hurry.
It ain’t much better for coking coal:
This is a megacrash in Australia’s terms of trade in the making.
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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