Posted on 11/23/2015 7:06:40 AM PST by blam
Greg McKenna
November 23, 2015
It’s an ugly day on industrial commodity markets in Asia today with some big falls in crude oil, copper, zinc, and Chinese rebar steel.
At the moment Nymex crude for January delivery is down 2.74% to $40.75 a barrel, Brent crude is down 1.75% to $43.87 a barrel, Copper in US trade has fallen 2% to another six-year low of $2.01 a pound, but it is down 3.74% in Shanghai.
Zinc in Shanghai is down 1.03%, and rebar steel on the Shanghai exchange is off 3.35%. Interestingly even against this back drop Gold still can’t find any buyers and is down $7 an ounce to $1071.
The weakness appears based in Chinese exchanges, where the biggest falls are but as the prices also show the price pressure has reverberated around the globe. Today’s selling has also been accompanied by a continued US dollar strength today while the PBOC allowed the USDCNY to set back near the top of the recent, weaker range, at 6.3867.
Trade has had a real “China worry†feel about the move today with Australia’s big miners under pressure as well. BHP is down 2%, Rio is off 1% and commodity currencies like the Australian and New Zealand dollars have been dragged along for the ride lower. The Australian dollar is down 0.88% at 0.7174 while the Kiwi is off 0.81% to 0.6509.
(snip)
(Excerpt) Read more at businessinsider.com ...
DEFINITION of 'Doctor Copper'
Market lingo for the base metal that is reputed to have a Ph.D. in economics because of its ability to predict turning points in the global economy. Because of copper's widespread applications in most sectors of the economy - from homes and factories, to electronics and power generation and transmission - demand for copper is often viewed as a reliable leading indicator of economic health. This demand is reflected in the market price of copper. Generally, rising copper prices suggest strong copper demand and hence a growing global economy, while declining copper prices may indicate sluggish demand and an imminent economic slowdown.
Copper is collapsing, not dropping. This is a vote of no confidence, basically.
Just dumped some renovation-related copper pipe at the local metal scrap pile. Not much incentive to sell it.
This along with the all time low in the Baltic Dry Index, does not bode well for the economy. A storm is coming.
That is an amazing admission. The copper thefts have stopped happening around here too. Nobody is paying for it any more.
Indulge me, please.
I am commodities knowledge challenged.
Who is this a vote of no confidence against?
The purchasers of copper...the sellers...the users, producers?
Is copper not a viable commodity in a society that uses it for many, many things?
Granted, the price at 3-4 dollars a pound was kinda high, in my opinion, considering the recycle ability of it and the fact that is not used as exclusively (being replaced by fiber optic, etc) as it once was.
So, what is the story?
Will my pennies go back to being made of copper?
Copper and Zinc are good indicators of orders of material, and future orders, used in construction and fabrication.
Silver also steadily dropping. Thousands of industrial and medical uses.
The big copper mine near my Arizona winter home just laid off half its work force. The other half probably aren’t far behind.
Indulge me, please. I am commodities knowledge challenged. Who is this a vote of no confidence against?
I suspect that RinaseaofDs meant that it was a vote of no confidence in the economy at large.
The spot price of certain commodities - and the Baltic Dry Index - are believed by many to be so-called "bellwethers."
A bellwether is one that leads or indicates trends. The term is derived from the Middle English bellewether and refers to the practice of placing a bell around the neck of a castrated ram (a wether) leading his flock of sheep. The movements of the flock could be noted by hearing the bell before the flock was in sight.
-Wikipedia
Regards,
I understand that (and I know what a bellwether is), but was there not a trend of most manufacturing concerns to move AWAY from Chinese-manufactured/produced metals because of the now well known shoddy quality of them?
I don't think that would depress the price...rather it would exacerbate a supposed shortage.
'Course, doesn't explain the small drop in the price of gold.
On the other hand, I still haven't figured out the reasoning behind the constant fluctuation of the price of gasoline as related to the price of oil, but...
An economist, I am not.
The Baltic Dry Shipping Index Just Collapsed To An All-Time Record Low [Ominous for Global Trade]
You have a couple of good posts that aver that copper is regarded as the belwether to the economy. If copper is in demand, then stuff must be being built. In the same way that DJ Transports are regarded as a “health indicator”. If stuff is being sold, it is being shipped.
Now as to the underlying cause or causes: One is certainly the deteriorating demand from China. As it turns out, some Chinese speculators developed huge stockpiles of copper when it was in demand. Well, they can’t just let it sit there; they have to borrow against it, to use it as collateral for loans. To lever up, as they say. At minimum, to help pay for the warehouse rent. But with the price of copper plummeting, those loans become undercollateralized and lenders demand a “top off”. The copper hoarders then sell copper, but they are selling it into a declining market. Which exacerbates the decline. In many cases, the Chinese copper holders have (fraudulently) taken out *multiple loans* against their copper. So some of it is super-leveraged. They are in effect getting a margin call.
This is one of a few core differences between most commodities and stocks. While it is true that a stock can go to zero and some think or believe that commodities cannot because they are representations of real things, trends...uplegs and downlegs in commodities can go on much, much longer than *anyone* can believe. Much longer. And then even longer. Who on earth thought oil would go from $110 to $40? That’s really a giant move on any kind of basis, especially for such a vital commod.
It is also happening with USDollar, relentlessly strong and causing serious disruption in the rest of the world. Yaaaay! Oil got cheaper! People trying to call a turn in copper or oil or the USD are getting cornholed, over and over. One reason is the incredible turmoil roiling currency markets. Volatility in forex is causing all manner of distortions in the stock market and various commod markets. Just saying. Not decrying it.
However, Maxine Waters told me via private email that these oil price changes were the fault of evil speculators. Just passing that on.
By the way, I don’t know if they are still doing it, Goldman Sachs had several giant metals warehouses that they established in crumbling Detroit warehouses they probably got for free in various BKs and foreclosures. (Base metals, copper, zinc, nickel, not especially gold/silver although they are certainly involved in those markets) They worked to manipulate the domestic market by withholding stocks and delaying deliveries. Their market-cornering practices engendered a lot of complaints and I think they were quietly told to back off.
The drop in price is not limited to Asian deliveries.
“The big copper mine near my Arizona winter home just laid off half its work force. The other half probably aren’t far behind.”
Same thing happened just across the state line here in SW New Mexico. Hundreds of miners are now without a job here. That means that construction comes to as well as all local retail and restaurant businesses start hurting. Copper drives the economy around here.
Oops: “That means that construction comes to a halt”
Goods and products are made with materials.
The market for those materials is world-wide, i.e. copper, zinc, oil, wheat, etc. are bought and sold in bulk all over the world. Hence, they are termed commodities.
Manufacturers, anticipating demand for the final products, will buy, not buy, or sell commodities in quantity. Consumers do not buy commodities, except as speculators, so the only real market are manufacturers - or some government agencies to a very minor extent.
When demand for commodities drops, it is seen by market observers as a nearly pure indicator that manufacturers anticipate a falling consumer demand.
Ergo, this drop in commodity demand, unless reversed soon, will result in: fewer miners, fewer transportation workers, fewer factory workers, fewer retail clerks, i.e. fewer jobs.
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