Australia received some pretty disappointing economic news today.
For the first time since early 2011, the economy contracted, shrinking by 0.5% in Q3.
It’s come as a shock to many, however, help is at hand.
Chinese commodity traders are already doing their bit to help lift the Australian economy, at least in nominal terms, hoovering up bulk commodity futures with gusto yet again on Wednesday.
Just look at the final scoreboard — another stonking rally.
- SHFE Rebar ¥3,382 , 5.10%
- DCE Iron Ore ¥644.50 , 6.53%
- DCE Coking Coal ¥1,344.00 , 5.16%
- DCE Coke ¥1,870.00 , 6.67%
Iron ore and coking coal futures on the Dalian Commodities Exchange closed up by 6.53% and 5.16% respectively, which is no bad thing for Australia given they’re out two largest goods exports by dollar value.
Rebar futures on the Shanghai Futures Exchange, up 5.10%, also rallied hard, perhaps explaining the strength seen elsewhere.
According to Reuters, traders were replenishing steel inventories on hopes firm demand will be sustained next year as China’s manufacturing sector recovers and Beijing spends more on infrastructure projects.
“The reason why the steel market remains strong even though seasonally it’s a weak period is mainly due to supply-side tightness,” Helen Lau, analyst at Argonaut Securities, told Reuters. “Also the macroeconomic momentum is different from the same period last year.”
Others cited ongoing environmental inspections in China in Beijing’s efforts to tackle pollution have restricted output at steel mills, further tightening supply.
Whether that was the underlying driver behind the move, or just a whole lot of speculators piling in given huge upside momentum in these markets (iron ore and rebar futures have ripped higher for five straight days), remains unclear at this point.
Regardless, with the spot price for benchmark 62% iron ore fines settling at $79.73 a tonne on Tuesday, according to Metal Bulletin, it appears a near-certainty that a new two-year high will be struck when the group’s iron ore index is released later in the session.
You can read more here.
Business Insider Emails & Alerts
Site highlights each day to your inbox.