China’s commodities got smashed as expected. Now what?: Russell

Date: Fsebruary 3, 2020
By: Clyde Russell

, Australia (Reuters) – It’s no surprise that commodity prices in China were hammered on Monday when the virus-hit country reopened its exchanges after a week-long Lunar New Year holiday. What will be more important is what happens on Tuesday.

FILE PHOTO: A truck transports a container next to a cargo vessel at a port in Qingdao, Shandong province, China June 24, 2019. REUTERS/Stringer/File Photo

It was a sea of red ink as domestic investors got to trade for the first time since Jan. 23, with Dalian Commodity Exchange (DCE) iron ore dropping the maximum allowed 8% to 606.5 yuan ($86.64) a tonne at the opening bell.

Iron ore wasn’t the only commodity smashed. Shanghai steel rebar futures reached their down limit of 8% as well, dropping to 3,233 yuan a tonne before recovering slightly in early afternoon trading to around 3,260 yuan.

Shanghai copper slumped to its maximum daily limit, before recovering to trade at 44,880 a tonne two hours after the opening bell, down 6.8% from the close on Jan. 23.

The sharp losses were always likely when trade in China resumed, given the declines elsewhere in the world during the time that China’s markets were shuttered. The main question is what is likely to happen next.

Shanghai copper may offer some clues. While it did drop by the maximum allowed initially on Monday, it did recover a touch as the day progressed.

By early afternoon trade on Monday, the Shanghai contract has taken a bigger hit than the losses incurred by benchmark London copper, which has dropped 6% since the close on Jan. 23 to trade around $5,623 a tonne on Monday.    [FULL  STORY]