News

Just the Start of the Deflation in Commodity Prices?

The Reuters/Jeffries CRB Index has already fallen a long way from its 2008 high of 472.36. On April 5, the index traded at 165.22, near its low of 163.80 registered on Jan. 22.

But the deflation in commodity prices might be far from over.

An April 6 Yahoo! Finance article says it’s a case of oversupply and weak demand:

The world is about to have a good old-fashioned glut on its hands. …

China's crude steel, aluminum, shipbuilding, chemicals, cement, refinery products, flat glass, and paper will all have to be unloaded on the world, whether the world needs them or not. (Mostly not.)

Just getting started

'Sagging demand has already impacted China's steel industry. … Crude steel production capacity will be slashed by 100 million tonnes to 150 million tonnes over the next five years.

'The situation is so severe that the government predicts some 500,000 workers in the industry will be laid off.' …

China's biggest steelmaker, Baosteel, is still planning to increase output by 20% in 2016. And all of that supply is about to be unloaded onto a world that doesn't really need it right now.

What this will do is keep the price of steel (and any commodity where this dynamic is at play) really low.

You can read the entire article by following the link below: http://finance.yahoo.com/news/china-just-started-unloading-biggest-191110971.html#

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