Chinese commodity futures are tumbling again

Photo by Scott Barbour/Getty Images

Commodity futures in China are still tumbling, continuing the move started on Wednesday.

As the scoreboard below shows, it’s been another bloodbath so far on Thursday (4pm AEST)

SHFE Rebar ¥3,100 , -2.55%
DCE Iron Ore ¥419.50 , -4.33%
DCE Coking Coal ¥953.50 , -3.78%
DCE Coke ¥1,435.50 , -3.40%

Enormous declines, again.

Iron ore down 4.33%, with coking coal and rebar not far behind at 3.78% and 2.55% respectively.

Clearly it’s linked towards the outlook for steel given the linkages between the three.

In terms of iron ore, the most actively traded September 2017 contract on the Dalian Commodities Exchange has now fallen close to 40%, leaving it sitting at the lowest level since October 28 last year.

It was briefly over 40% at one point during the session.

Dalian Iron Ore Future – Sept 2017 Contract. Source: Thomson Reuters

A massive unwind of an equally big rally earlier in the year.

Vivek Dhar, mining and energy commodities analyst at the Commonwealth Bank, put recent falls down to fundamental, rather than speculative, factors.

“Oversupply concerns were driven by strong seaborne supply and subdued restocking demand after the three-day holiday period,” he said. “Market participants also cited softer seasonal demand for steel in the Chinese summer.”

Data from Shanghai Steelhome showed Chinese port inventories rose to the highest levels on record last week

Others, such as the National Australia Bank’s commodity research team, have said that the broader move in recent months has also been driven by an increase in speculative activity in futures.

Whatever the reason — be it fundamentals of speculative selling — the declines today are massive.

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