The hype surrounding the credit-fueled resurgence in base metals in the first half of 2017 has crashed and burned on the altar of reality in China's slowdown with industrial metals from copper to iron ore and zinc all plunging in the last two weeks. Odd that we don't hear much from mainstream business media discussing the implications for a global coordinated economic growth narrative…
Since the start of September, industrial metals have been hammered (as stocks soared)…
Iron Ore prices have crashed into a bear market…
As Citi describes it, complete carnage in Iron Ore today down over 6% on day as local specs reduce length ahead of holiday in China on the first week of October as bearish sentiment continues to gather pace. After peaking in August at $80 as we saw surging demand for high grade ores. Iron Ore started to trend down in early September, which reflected that fundamentals had begun to turn weaker. The tightness of high-grade ore market I referred to is now starting to gradually resolve as more supply coming online from Brazil and Australia. Demand is softer, as we see little improvement in China's steel consumption . Steel inventory also built as environmental inspections and steel mills' enter maintenance. We remain bearish on the long-term outlook of iron ore and expect 2018 prices to average $53/t so a ways to go. Needless to say today's move in IO has driven base prices lower with Nickel and Zinc taking the brunt.
Even Dr.Copper has given up…
And here’s some more grist for the doubters who scoffed at copper’s rally to a three-year high earlier this month.
The metal for immediate delivery on the London Metal Exchange cost $40.75 less than benchmark three-month futures on Tuesday, the biggest discount since 2009.
That market structure, known ascontango, shows “there’s no part of the world where copper is really scarce,” said Rene van der Kam, Singapore-based managing director of trader Viant Commodities Pte Ltd. He says to expect more losses after a pullback in prices this week.
And finally, as we warned previously, bear in mind that the lagged response to China's credit impulse is about to hit base metals… The rise and fall in China's credit impulse that has been so highly correlated (on a lagged basis) with industrial metals for the last eight years…
It appears "Dr.Copper" and his economics afficcianados are about to be relegated to "ignore" status once again.
via http://ift.tt/2xpQXQS Tyler Durden