Chinese Commodity Trading Volume Crashes: "Most Don't Even Know What They Are Trading"

Tyler Durden's picture

The speculative Chinese commodity bubble has begun to reach the mainstream as Citi's warning to "hold on to your hats" today at the surge in trading volumes across Rebar, Iron Ore, Coke, and Copper literally exploded with the former now the most actively trade commodity in the world. The frenzy has become so insane that the head of the largest metals exchange in the world exclaimed at a conference in Singapore today that "I don't think most people who trade it know what it is." We suspect he is 100% correct and judging by the following chart, we know exactly how it will end.

As Bloomberg reports, the head of the world’s largest metals exchange said while volumes in China’s commodity futures markets have become phenomenal, it’s possible some traders don’t even know what it is they are buying or selling.

“Why should steel rebar be one of the world’s most actively-traded futures contracts?” Garry Jones, chief executive officer of the London Metal Exchange, said at a conference in Singapore on Wednesday. “I don’t think most people who trade it know what it is.”

 

Trading of commodity futures in China from steel reinforcement bars -- a benchmark product used in construction -- to iron ore, coking coal and cotton has ballooned this month on an unprecedented surge in retail investor interest. The jump in volumes has stunned global markets, according to Morgan Stanley, while eliciting concern from Goldman Sachs Group Inc.

 

Exchanges in Asia’s top economy including in Shanghai have announced a series of measures this month to cool the frenzy, and said more steps may follow.

 

“If you look at the client base of most Chinese exchanges, it’s heavily retail-focused,” Jones said on a panel discussion addressing commodities and risk management in China. The exchanges there “have very high retail participation. They have a very high velocity of trading,” he said.

Now where have we seen this pattern of massive speculative volume rushing in from retail investors chasing a trend?

The speculative activities will be vulnerable to a sharp reversal, once the upward price momentum wanes, according to BMI Research, a unit of Fitch Group, drawing parallels with a rally, followed by a slump, in Chinese equities last year.

And that did not end well for price action before in 2015...

 

or 2009...

 

And just as expected above...once the volume reaches a crescendo it crashes and The Party's Over

 

As reports from China suggest both major margin increases at the main exchanges and crackdowns on real production: Tangshan city is banning all coke, steel & cement productions for 24 hours starting this noon.

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blindman's picture

do not know what they trade or what they do;
what they are or why they even care.

OrangeJews's picture
OrangeJews (not verified) kliguy38 Apr 27, 2016 9:21 PM

Jokes on them, the Chinese use very little rebar in what they build. Just remember that building full of sand and very little rebar.

johngaltfla's picture

I bid 2.28 WonkaBars per ton for Cat shit.

Whoops, wrong board, wrong market.

Let me translate to Mandarin and repost.

Tyrone Shoelaces's picture

What exchange do I go to to trade Cat shit?

NYMEX or CME?

johngaltfla's picture

It's in Shanghai.

Symbol:

TIDYCAT

Pinto Currency's picture

 

When they realize that their currency is going to be greatly devalued, they'll pile right back in again.

Then there'll the the gold yuan to stop the madness.

John Kich's picture

This is Donald Trump's most shocking statement yet,

However the mainstream media isn't saying a word about it!

What are they really trying to cover up?!

http://legitorscamreview.com/the-final-bubble/

cliffynator's picture

This should be bullish for US futures tomorrow.

ebworthen's picture

Cat belly's!  That's where the money is at!

gregga777's picture

This is another instance where a few very corrupt officials high within the Chinese Communist Party are raking in ¥ billions that will soon show up as C$ billions in Vancouver, Canada, laundered through phony housing purchases. These market spikes occur every time that the People's Bank of China pours liquidity into their economy. The insiders know that it's coming beforehand and make their purchases accordingly. After the lemmings pour into the market and trading volumes skyrocket the insiders sell knowing that the brakes are going to be applied by the PBoC and the exchanges. Then it's a simple matter to transfer their ill gotten gains abroad through phony real estate purchases. There is an entire Chinese Yuan money laundering industry in Vancouver, Canada, catering to these corrupt officials, while morally bankrupt Canadian and American law enforcement agencies "see no evil, hear no evil and speak no evil".

old naughty's picture

" There is an entire Chinese Yuan money laundering industry..."

Money doesn't flow one way only. It goes around and around...

from caSINo, stawk, commdities, housing, to currencies, they flow !

Stick your fingers in, see how much you can clamp between your fingers. Elite bankers do that 7.24, no laws, no borders.

 

Lots of people (em, insiders) know...Jones speak (not in London, in Singapore, hummmm) then Tongshan (City cum authority) bann 1x24, wow !!!

 

 

Squid-puppets a-go-go's picture

the world is a baby bath full of dirty water; to stop it sloshing over one side, they tilt quickly to the other, then the rebound wave also needs to be tilted

oligarchs themselves will start to lose their wealth on the unpredictability of this volatility. Thats when the reboot will be instigated.

Dragon HAwk's picture

I don't care what it is if we can make it go up, Buy It..

 is there a symbol for Vaseline.

tarabel's picture

 

 

The symbol I use is "uh-oh, wrong bar."

Oldwood's picture

Its like earthlings being dropped on a distant planet desperately struggling to rationalize their new environment when NOTHING is as it should be. It doesn't mean the planet will implode, simply that the earthlings will perish if they fail to adapt. The powers that be have pulled the rug from under us, the rules have been changed and nothing we do will change it. expecting or demanding that they change back is a waste of time. There is no doubt that this all will blow to high hell, and probably soon, but all we are left with is our brains to best anticipate our survival techniques, and that will not be based on our last "recession" or even depression. New rules....same as the old rules...but a lot worse.

Ajax_USB_Port_Repair_Service_'s picture

A diversified portfolio should have at least a 10% investment in steel rebar.

(And wtf just happened to DOW futures?)

Cruel Aid's picture

cant find the story dollar drop, futures drop, 10 yr drop

Sleep tight, green pre mkt. goofiness

Die mkt die

 

Edit, what did i say!

NuYawkFrankie's picture

re Most Don't Even Know What They're Trading..

Sounds like the "Good Ol' Days" of Derivatives Trading - when "churn" was the name and "commission" was the game - and the only question ever asked was *IIGFG?

(*IIGFG - Is It Good For Goldman?)

Squid-puppets a-go-go's picture

yea wow, long time since i heard the term 'churn'

Infield_Fly's picture
Infield_Fly (not verified) Apr 28, 2016 3:55 AM

we trade many.

 

no prawbrem.

conraddobler's picture

They copy and amplify everything about us for a country that thinks they are superior that's a strange thing to do.

Jokes on them, that behavior results in them duplicating all our worst traits but taking it up several notches.  Well done, well done.