Bulk Commodities Update – October 2014
China’s third quarter National Accounts showed the economy grew by its slowest rate since March 2009. From a bulk commodity perspective, key parts of China’s economy remain comparatively weak. Industrial production has slowed in recent months.
- China’s third quarter National Accounts showed the economy grew by its slowest rate since March 2009. From a bulk commodity perspective, key parts of China’s economy remain comparatively weak. Industrial production has slowed in recent months and fixed asset investment has continued to trend down – most notably in manufacturing and real estate.
- Global steel production has continued to increase – rising by 3.4% yoy over the first nine months. Growth remains driven by China, which produced around half the global total.
- The growth in China’s apparent consumption of steel has slowed considerably over 2014, with weaker construction activity a key contributor to this trend. Construction accounted for around 56% of China’s steel consumption in 2013.
- Iron ore markets were mixed in October. From mid-month, prices began to rally, pulling away from five year lows recorded in September, before retreating back to these lows at the end of the month. We expect our hybrid spot & contract price to fall to US$93 a tonne at the end of 2014 and further to US$85 by the end of 2015.
- Metallurgical coal spot prices have continued to track sideways across most of October – a trend that had been evident since mid June – before drifting slightly lower, down to around US$111 at the end of the month. We continue to expect prices to trend back towards US$150 a tonne (for hard coking coal) by the end of 2015.
- Spot prices for thermal coal have continued to decline across October – drifting below US$65 a tonne late in the month (at the port of Newcastle) – the lowest spot price in over five years. Our forecast for contract prices remains unchanged, with prices at US$80 a tonne for the 2015 Japanese financial year (commencing April 2015).
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About the Author
Gerard has over a decade of experience as a professional economist, currently specialising in international economic research. He is responsible for monitoring and forecasting trends in emerging Asian economies, with a particular emphasis on China. He is also a member of the bank’s commodities research team, focusing on trends in iron ore and coal markets.
Gerard joined NAB in 2005, and previously focused on risk analysis across a range of industry sectors in Australia and abroad. He had particular expertise in areas such as Mining, Manufacturing, Healthcare and Retail, including the development of research into online retail sales. Prior to joining NAB, he was an economist with the Australian Bureau of Agricultural and Resource Economics, focusing on commodities and energy research.
He holds Bachelors degrees in Economics (with Honours) and Commerce from the Australian National University.
