The retail punting on Chinese steel and rebar future markets was looking shaky and no surprise that both commodities had their worse week on record with a weekly fall of 12%. These two items have now unwound 80% of their recent rally which we hope indicates that the falls may be nearing an end.
Also on the decline was iron ore and to a lesser extent copper. In USD terms copper is now down 8% from the beginning of the month.
The only good news for local prices has been continual decline of the AUD/USD exchange rate which has fallen to below 73 cents.
*** DJ US Wants China to Slow Overproduction — Market Talk-15:52 ET***
US is pushing China to wind down its excess manufacturing capacity, particularly in the metals sector where too much production continues to keep global prices weak and undermine American sales.
US Treasury Secretary Jacob Lew told Chinese Vice Premier Wang Yang that Beijing needs to “reduce excess industrial capacity in China’s key base metals sectors, and establish a new set of official export credit disciplines to create a level playing field for US exporters,” Treasury said in a readout of a call between the two officials.
Economists warn that China’s still keeping unproductive firms online as part of its strategy to keep the economy from cooling too fast. Not only does that create new risks for the world’s second largest economy, it harms US industry. The issue will be a top focus when officials from the two countries meet for the regular US-China Strategic & Economic Dialogue next month in Beijing.