Frustratingly, none of these indexes includes Australia’s key bulk commodities of iron ore and coal.
Iron ore is falling out of bed and should continue to do so. This is Dalian futures:
The same can be said of coking coal in China:
But longer-dated seaborne coking coal prices are still rising in Singapore:
Thermal coal is similar
Which is pretty weird because JKM with which it competes has come off a lot and still is:
There are huge arbitrages all over the place here. Chinese coals are much lower than seaborne. Gas is much lower than coal. China is digging up more coal at an astonishing speed. Iron ore is still in a glut.
The market looks pretty stretched and irrational, doubtless pushed out of shape by real supply constraints and imagined ones.
I still think that a big global recession will rebase the lot. The commodity market needs it.
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.
