The commodities bubble has begun to burst. Lumber is crashing, copper is fading and foodstuffs like corn and soy are copping it. China’s credit impulse has sunk lower than a snake’s butthole indicating base metals and bulks are next. Oil is OK but so what? It’s manipulated. Yet, check out the latest Wall Street strategist
The ferrous complex was mostly closed over the long weekend with much of Asai shut too for the Dragon Boat holiday. Spot iron ore rose and everything else was on pause: News over the break was very bad for demand as Chinese credit cratered but it was better on the supply side with Vale facing
Australia’s personality-disordered PM, Scott Morrison, is galavanting around the world drumming up support to contain China. He’s invited himself to the G7 to lace it with anti-CCP warnings. He’s dropped into Downing Street to spray Beijing. He’s soon off to the White House for an anti-CCP powwow. At home, more US marines and naval access
Ever since China installed its “three red lines” policy early this year, there have been increasing signs of stress in China’s mega-development sector. Floor area starts have dropped sharply, equity markets have punished the sector and credit markets begun to tighten the noose on the more freewheeling names. That process continues today as Chin’s greatest
The ferrous complex was well bid on June 11, 2021 for no reason that I can discern beyond my own posting. Spot was firm. Dalian paper jumped overnight. Steel has not updated: Dalian trading started weak yesterday until I posted on Vale’s latest dam troubles. Although it was not news, my reminding the market of
I said recently that iron ore was not going to go to $300 unless we saw some new crisis to supply. Either another busted dam in Brazil or nationalist Indian policy or the like. Well, we have a candidate, via Reuters: Regional Labor Department for the southeastern Brazilian state of Minas Gerais says Vale SA’s decomissioned
Readers will know that we are of the view that China has entered a new round deleveraging and economic restructuring that will crash commodity prices in due course. This plan is two-pronged. It aims to slow the development sector to end overbuilding. And it aims to deleverage local governments as well. I have already discussed
The ferrous complex was firm yesterday with a broad rally on a delayed reaction to Tuesday’s news about more Brazilian mine suspensions. Spot was up. Paper flat overnight. Steel rallied: Chinese port inventories are at 127.65, adequate only: Not much else to say. I still think that the risk of an EOFY sell-off is high
Mwhahah. I have warned that China and commodities are a Mexican stand-off. Because China is the only market that matters in terms of volume for all dirt, it could in theory apply fixed prices and there is not a whole lot anybody could do about it. I have argued this is a risk for iron
Lordy, already! A few months of three red lines policy and the titans totter. China’s largest property developer, Evergrande, is increasingly on the nose for credit markets: And equity markets: Regulators have instructed Evergrande counterparties to stress test their exposures. Evergrande denies any wrongdoing in its partly-owned Shengjing Bank Co, as well as heavy discounting
When one sits around all day reading Wall Street research, patterns emerge. One is that professional managers very obviously read one another’s stuff and copy it. Another is that Wall Street likes to find a kernel of truth in some market, blow it out of all proportion, and inflate a bubble so it can front-run
The ferrous complex went a bit haywire yesterday with prices all over the joint. Spot jumped. Paper roared overnight. Steel fell: There’s not much new here. We’re just be pushed around within a range. That said, steel mill margins are still getting belted which is a major warning for iron ore going into EOFY. In
Good stuff from ANZ on iron ore. All points I have made. Copper is also at risk as China slows. On oil, expect an Iranian deal.
Australia’s nemesis, The Global Times, is back today with more Australia bashing: #Australia has good reason to diversify its #ironore exports to #China ASAP. According to Rafael Suchan, CEO of Germany’s Scholz Recycling Group, China’s iron ore imports will be nearly halved by 2030 with the help of steel scrap #recycling. pic.twitter.com/X9mEJmoekD — Global Times
Readers will recall that there has been something a mystery in some components of the very steep slowdown in Chinese debt issuance over the last four months. Most pointedly, local government borrowing, which accounts for a lot of infrastructure and property investment, cratered 80% year on year in the four months to April despite having
The ferrous complex was universally weak on June 7, 2021. Spot fell. Paper tumbled. Steel was whacked. That this all happened on the day that Brazil plugged another dodgy dam is not a sign of market strength. The proximate cause was mediocre Chinese trade data. Iron ore imports for May were lousy at 89.79mt and
TS Lombard with the note After leading the recovery last year, real estate investment is set to decelerate under macro and sector-specific deleveraging campaigns as well as higher input costs. We expect property investment to reach 5% yoy in H2/21 from13% you in April. The slowdown will hit local government financing and investment. The combined
The ferrous complex was mixed Friday with spot down, paper up overnight and steel firm as well. But that all misses the point. This market is showing signs of early trouble: Why am I getting nervous? CISA late May steel output fell heavily: It is not unusual for May production to pull back a little
The ferrous complex rolled over yesterday and last night as the US dollar rallied. Spot was up a little but paper fell overnight. Steel has not updated: If the US dollar advances from here on strong US jobs then expect iron ore to have peaked and fall away earlier. It is a factor after the
The China trade war on Australia is not going at all well. Iron ore is trading on a vast geopolitical premium. Damaged commodity trade flows have been redirected to other nations with a minimum of fuss. Australia’s current account surplus has skyrocketed to records. Based on outcomes so far, it’s the best thing to ever
The ferrous complex was much calmer on May 2, 2021 than in recent times. Spot hardly moved. Paper warmed a bit. Steel fell: In other news, Westpac reports on the rebound in Aussie volume after Q1: May Australian iron ore exports fell short of our expectations at just 75.7mt. That’s -1%yy and -4%3myy. Given recent
TSLombard with the note: Property investment slump. Real estate investment is set to slow in H2/21 on tighter credit and higher input costs. Falling land sales will hit local government revenue and investment. Beijing will welcome a property FAI slowdown as officials battle to rebalance the economy and curb soaring China PPI. After leading the
The ferrous complex took on the outlines of a circus yesterday as everything rallied. Spot was up. Paper up more overnight. Steel too: The trigger? This: Authorities had urged local long-process steel producers to cut production by 30%-50% in March to improve air quality, sparking supply concerns as the city accounts for more than 13%
Yesterday, the ABS release terms-of-trade data for the March quarter, which surged another 7.4% over the quarter to be sitting at its second highest level on record: Yesterday evening, the Reserve Bank of Australia (RBA) also released its commodity price index for May, which surged another 5.9% over the month in SDR terms (the closest
The ferrous complex is getting more and more volatile. I take this as a sign that we’re topping out given it appears to be a struggle between bulls and bears versus the former bulls only. Spot jumped. Paper went further overnight. Steel is lagging: Yesterday’s steel PMI was soft with output booming but new orders
Demographics is destiny, they say. A young demographic bulge provides a strong tailwind for economic growth. An aging demographic bulge is an equally strong headwind. Alas for China it is increasingly the latter and more so than anybody previous thought: China has shifted to a three-child policy. COVID crushed its birth rate. This has brought
This is the second in a series of four posts I’m publishing on the contrarian view for inflation. Part one: Inflation today is not the same as inflation in the 1970s. Part two: commodity inflation is far more leveraged to Chinese stimulus than developed market stimulus. And the signs are ominous. Part three: the inventory
The ferrous complex firmed on Friday May 28, 2021 as Chinese policy pushed the market around like flies to wanton boys. Spot firmed. Paper and steel jumped. China is wrestling with itself. On Friday we had this to lift prices: China’s Ministry of Industry and Information Technology will seek to establish a mechanism to contain
Whether China cuts off Australian iron ore is not in question. Only the timing of it is. As well as what it will do to the Australian economy when it does. The causes of the cut-off are well understood. There are three main drivers. First, the US/China cold war is bifurcating the global economy into
Because this time “it’s different”. Last night witnessed some aggressive rebounds in commodity prices thanks, in part, to a new Goldman note assuaging rising concerns for commodity prices emanating from the imminent Chinese slowdown. There are some days when Wall Street really does take the cake. Buy the China led dip. The bullish commodity thesis
