Chinese Commodity Crash Continues, But Pigs Are Flying
When it comes to keeping track of China's economy, one can listen, and ignore, the official goalseeked and made-up-on-the-fly data released by the government, or one can simply observe the price dynamics of the all-important Chinese commodities sector (because with fixed investment accounting for well over 50% of GDP, the marginal price of the commodities that are used in capital investment tell us all we need to know about the true state of the Chinese economy). It is here where we find that contrary to the recent performance of the Shanghai Composite, which has been trading exclusively on the coattails of the most recent unofficial QE by the PBOC, commodity prices in China are actually crashing across the board, which in turn suggest that the real GDP is most likely anywhere between 20% and 60%, if not more, below the "official" 7.5% GDP print.
Here are the charts, alongside some commentary from Bank of America:
Last week, Qinhuangdao (QHD) 5,500k thermal coal price was at RMB480/t, unchanged from the week prior. QHD coal inventory decreased to 5.6mt, down 0.5% wow.
In August, growth of daily coal consumption at 6 major IPPs dropped by 22.5% yoy, down from the -16.3% yoy in July.
Rebar price was RMB3,058/t, down 1.1% wow. Rebar inventory in 34 major cities was at 5.47mt, down 1.9% wow. Concerns about the property market and relatively high steel production are still weighing on steel prices.
Iron ore price was US$88.0/t, down 1.9% wow. Iron inventory at Chinese ports was 112mt, up 1.4% wow. Iron ore prices have been under immense pressure since the beginning of the year and are likely under continuous pressure from the weak housing market.
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