China Industrial Commodities Collapse As Sentiment Tumbles To 15-Month Lows

Tyler Durden's picture

Unlike the QE-lite-driven exuberance in Chinese stocks of the last few weeks (which faded dramatically overnight), China's industrial commodities (with near-record inventories) and seeing prices collapse. This may shock some who espy PMIs and government-created trade data and proclaim, China is fixed. In fact, as JPMorgan's China Sentiment Index (JSI) shows, things are anything but bright as it fell to the lowest since June last year (at 48.3 in August). Sales and margins are tumbling - despite supposedly lower input costs. Lastly, those focused on spot Yuan movements (strength in recent weeks) have suggested this also confirms China strength - inflows - but looking out 12-months shows the market is expecting a dramatic devaluation from current levels in the Chinese currency is coming.


JPMorgan's China Sentiment gauge tumbled below 50 - to its lowest since last June..


JSI declined sharply to 48.3 in August, the lowest level since June last year. July was the recent high at 54.4. Output/ sales, order book and gross margins weakened in August.


Dismal.. which appears to fit better with pricing of China's core industrial commodities... (via Business Recorder)

Chinese iron ore futures fell on Monday to their lowest since they were launched last year, while weaker buying interest pushed down prices for spot cargoes further on slower steel demand.

Benchmark spot iron ore is now trading close to this year's low of $89 a tonne and a further decline would take it to its weakest since September 2012, as top, low-cost miners lift output even more in a bid to take out smaller producers.

"When the price drops this fast, Chinese mills tend to wait and see and buying activity could slow down. Supply is still huge and we see various offers from miners, big mills and traders," said an iron ore trader in Shanghai.


As inventories rise once again - and remain near record highs...


Weaker steel prices have weighed on iron ore as a slowing Chinese economy and sluggish property sector darkened the outlook for demand. The most-active January rebar contract on the Shanghai Futures Exchange fell to 2,961 yuan a tonne on Monday, its lowest since the exchange launched rebar futures in March 2009.


And The Baltic Dry - despite Cramer's hopes - remains mired in over-supply and under-demand...


Perhaps the message is starting to sink in... SHCOMP's biggest drop in weeks...


And despite recent strength in Spot CNY... the market's forward-looking perspective of the Yuan sees notable devaluation coming...

Charts: Bloomberg and JPMorgan

*  *  *

But apart from that... China is firing on all cylinders... right?

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
NOTaREALmerican's picture

I'd say it's due to the humid weather that China experiences in the summer months.  

Who wants to shop for Aggregates,  Iron Ore, and Rebar when it's humid,  you just get all sweaty carrying it home.  

kaiserhoff's picture

Even cheaper, cheap plastic shit that breaks in a day or two, just in time for Christmas;)

Hedonic index, Bitches. 

Vampyroteuthis infernalis's picture

And the US markets hit records. Nothing to see here..... move along.

wallstreetaposteriori's picture

Chinese QE!!!  Why the fuck not... they copy everything.

hungrydweller's picture

Whatever ZH, you don't get it.  All of this is planned until it blows up in the CB's faces.

AdvancingTime's picture

The debate continues as to how stable china really is. Much of the recent growth in China after 2008 came from a massive 6.6 trillion dollar stimulus program that expanded credit and poured massive amounts of money into the system. This money encouraged expansion and construction with little regard as to real demand or need. Like a plane on autopilot China continued in the direction it had been on.

Now China finds itself in a credit trap. For years the people of China have had the habit of saving much of what they earn but the low interest rates paid at banks has not rewarded savers. With few investment options much of this money has drifted towards housing and driven housing prices sky high. The economic efficiency of credit is beginning to collapse in China and the unwinding of China’s giant credit spree could be very painful. More in the article below.

g speed's picture

Finding and controlling the "shadow banks" will be about as easy as finding the "shadow owners" of the FED.  Ten to one on a buck they aren't even Chinese---just saying--

blu's picture

Okay that's interesting but how are the massage parlors doing?

ebworthen's picture


Moar T.V.'s!  N.F.L. season is starting!  Moar chicken wings!

If only we buy more crap everything will be o.k.!

Buy some stuff!


Fuku Ben's picture

On a bright note chicken feet futures are up

walküre's picture

I guess no Boeing orders to save the day? About those Boeing orders... Boeing is financing the purchases now. How many orders are financed by Boeing credit at next to nothing?

Are commercial airliner contracts maybe a hedge or convenient facility to launder money, hide money or exchange soon to be worthless currency for a tangible asset? Can these orders be classified as commercial orders but in reality coming from the Pentagon for warplanes?

The sheer magnitude of the Boeing orders since the airshow is strange. Air traffic is not exactly growing at the same speed these orders would suggest. Maybe it's legit and increased range or fuel efficiency are the reason. Would be good to get more details from Boeing on these orders, who ordered and which bank is financing the deal.

IANAE's picture

Orders clearly do not translate - one-for-one - into deliveries, and large asset has the potential to be used for laundering in scale albeit usually in cash transactions.

That said, former Ford and Boeing CEO Alan Mulally demonstrated, handily, that he well understood finance (commercial, retail, and international) when he took the helm at Ford. No doubt there is a smart financial model in use. 

BandGap's picture

My boner goes boeing!

On one hand we argue against flooding the market with cheap money and debt, the next we sit and wonder what companies would do if they had cheap money and inexpensive debt if thye wanted to upgrade their fleets?

I have no money in the bank. Like the big boys I'm buying shit that will be worth something later.