Chinese commodity futures are going bananas again

Picture: Getty Images

Chinese commodity futures are going bananas on Monday, led yet again by iron ore.

Here’s the scoreboard halfway through the session:

  • SHFE Copper ¥47,710 , 1.99%
  • SHFE Aluminium ¥13,375 , -0.52%
  • SHFE Zinc ¥22,795 , 1.09%
  • SHFE Nickel ¥95,670 , 3.35%
  • SHFE Rebar ¥3,224 , 2.97%
  • DCE Iron Ore ¥606.50 , 4.48%
  • DCE Coking Coal ¥1,292.00 , 2.22%
  • DCE Coke ¥1,766.00 , 1.87%

Yes, they’re back to behaving like a casino, rather than a market, with most contracts reversing early declines in the latter parts of morning trade.

Some market participants have been brave enough to pin the moves down to fundamental factors.

“We have not seen any signs of slowdown in steel production,” an unnamed Shanghai-based iron ore trader told Reuters.

“Traders’ inventory of steel products is very low so when the steel price goes up, they buy cargo to build their inventory and avoid further price increase,” he said.

Others have also cited elevated coking coal prices — helping to boost the appeal of higher grade iron ore which requires less coal for steel production — as another supportive factor.

However, given the wild price action already seen during the session, it’s likely that the gains are yet again being driven by speculative forces, rather than any fundamental factors.

Indeed, earlier in the session, iron ore futures were nursing a loss of more than 2%.

That’s a more than 7.24% turnaround in just two hours of trade.

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