Lack Of Macroeconomic Data Supports Commodity Market Weakness

"Fear" in commodities market

"Poor economy means poor demand for steel, which is the main reason for the recent fall in steel prices."

Guoxin futures analyst Shi Yuchen believes that a series of Chinese economic data released recently shows that the economic situation is not ideal.

Since then, China's macro-economy is facing many problems such as slow growth in fixed asset investment and declining growth in manufacturing industry. Meanwhile, PMI, industrial electricity consumption and railway freight volume have also maintained a relatively low growth rate, which makes the market's economic forecast for the fourth quarter of this year gradually decline.

"China's economic performance in September was much lower than expected, and the performance of industrial added value, fixed asset investment and consumption data were all worrying."

CITIC futures analyst Yin Dan believes that the overall economy is still facing greater pressure from the real estate market, and the road to recovery and stabilization is still uneven.

International ore giant low price output

iron

For the first time since September 2009, iron ore has fallen below the US $80 / ton mark for the first time since last week, with a price drop of up to 41%, and the price is almost cut.

Relying on the obvious advantages that the production cost is lower than the 1/4 of the high cost mine, Rio Tinto, Bhp Billiton Limited, Fuentes Cu metal group and Roy Hill take the opportunity to further expand the capacity and implement the strategy of low price expansion, so that the output of iron ore will increase by 1 billion tons.

"Unlike in the past, the main reason for this price fluctuation is not in China, but because of the surge in output led by Australia, a big mineral country.

The entire industry is in serious oversupply, which makes it impossible for China's massive steel plants to absorb such large scale production. "

Li Yajing, an analyst at Guangzhou Everbright Futures Co., Ltd.

Goldman Sachs believes that by 2015, the global supply of iron ore will be more than 3 times more than 52 million tons this year, to 1.63 billion tons.

The intensification of oversupply will fuel the price drop of iron ore.

Standard Chartered bank analyst Melinda Moore said in the Research Report: the supply and demand balance of the iron ore industry in the fourth quarter looks rather bad. Therefore, in addition to 2008, we are more worried about the price decline in the fourth quarter of this year than in the past ten years.

Morgan Stanley said that if the iron ore market is rational, some high cost Chinese mines will be eliminated, thereby reducing the output of hundreds of millions of tons of the market, or promoting a decent rebound in iron ore prices.

Enterprises increase horsepower production

Unlike previous years, looking back to the three quarter of last year, there was no "gold, silver and silver ten" expected by the market.

The main reason lies in:

First, production enterprises are driven by profits and continuously increase their supply.

The reduction in the cost of iron ore has led to the best profits of iron and steel enterprises since 2013.

"Since June, the steel plant has earned a profit of 50 yuan -100 yuan for producing one ton of rebar steel. In July, the price of iron ore accelerated and the spot steel price decreased slightly, and the profit per ton steel reached 200 yuan or even higher. This is the best profit since 2013, which has prompted the steel plant to increase its horsepower production."

Shi Yuchen, Guoxin futures analyst, said.

Zhang Yuan, Galaxy futures analyst, said: "for steel products, according to past practice, only when the profit per ton of steel is below -150 yuan will we see a more obvious effect. At present, the gross profit of the steel industry is still about 200 yuan, and only if the price goes further down, can enterprises take the initiative to reduce production."

Two, the real estate downturn, unable to accept the enthusiasm of supply.

For the real estate industry with large steel households, although recently many governments have introduced the supporting policies such as restriction and relaxation, but some cities that have implemented policies for half a month or so have yet to usher in a significant improvement in their turnover. Buyers still rely mainly on hesitation and wait and see.

In January -8, the area of real estate sales decreased by 8.3% compared with the same period last year, a decrease of 0.7 percentage points over that of January -7.

Of the 70 big and medium-sized cities in August, there were 68 cities with falling prices, the largest number in recent years, indicating that the property market is still in a doldrums.

The new area has been reduced continuously, which means that the demand for steel threads such as thread will be reduced in the next few months or even a year.

CITIC futures analyst Liu Jie believes that in July -8 month real estate sales area growth rate negative growth, and the decline has increased, and finally began to drag on real estate development investment and new construction area, according to the real estate market operation law, the real estate recession will continue, the macroeconomic weakness and the real estate market overall weakness will continue to suppress steel price and ore price.

Zhang Yuan, an analyst with Galaxy futures and steel futures, said that although domestic exports remained relatively strong in August, the weakness of domestic demand caused the real economy to lack a relatively strong endogenous growth momentum. Taking into account the market pressure brought by the cooling of investment in real estate and other industries, we remained cautious and pessimistic about the four quarter of the economy. With the fall in the operating rate in the lower reaches of the winter and the increase of operating pressure in related industries such as real estate, ferrous metal related commodities will be further pressurized.