After what has been a solid month for equities and bond investors, month end flows have probably play their part in the price action overnight, US equities have lost momentum, UST have led a rise in core global bond yields and the USD is stronger. US and European inflation releases favoured the notion the Fed and ECB are done with their respective tightening cycles.
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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