Among mainstream media news that unemployment fell in Australia (by a mere 0.1%) there remains some very bad economic signs, mostly ignored by above mentioned media. Though Alan Kohler did mention the collapsing Baltic dry Index the other day on TV. And some other dude was quoted as saying he was very skeptical of the unemployment numbers, describing them as wild guesses…..
The Automatic Earth (Nicole Foss’ website which Raul Ilargi has seemingly taken over…) has been debt rattling like crazy lately.
Anglo American, a British company, and one of the world’s biggest miners, and a ‘producer’ (actually just a miner, how did those two terms ever get mixed up?!) of platinum (world no. 1), diamonds, copper, nickel, iron ore and coal, said today it would scrap dividends AND fire 85,000 of it 135,000 global workforce (that’s 63%!).
Anglo is just the first in a long litany line we’ll see going forward. Commodities ‘producers’ are being completely wiped out, hammered, killed, murdered. They’ve been able to hedge their downside risks so far, but now find they can’t even afford the price of the hedges (insurance) anymore. And then there’s all the banks and funds that financed them.
And they’ve all been gearing up for production increases too, with grandiose plans and -leveraged- investments aiming for infinity and beyond. You know, it’s the business model. 2016 will be a year for the record books.
Just check this Bloomberg graph for copper supply and demand as an example. How ugly would you like it today?
And what’s true for copper goes for the whole range of raw materials. Because China went from double-digit growth to shrinking imports and exports in pretty much no time flat. And China was all they had left.
Iron ore is dropping below $40, and that’s about the break-even point. Of course, oil has done that quite a while ago already. It’s just that we like to think oil’s some kind of stand-alone freak incident. It is not. With oil today plunging below $37 (down some 15% since the OPEC meeting last week), it doesn’t matter anymore how much more efficient shale companies can get.
They’re toast. They’re done. And with them are their lenders. Who have hedged their bets too, obviously, but hedging has a price. Or else you could throw money at any losing enterprise.
But wait, there’s more…..
The rout beneath the relative calm of the market surface continues today as another sector has gotten crushed today in reaction to the domestic and global collapse in trade, the spreading domestic manufacturing recession and the bursting of the commodity bubble: truckers, and especially the heaviest, Class 8 trucks, those with a gross weight over 33K pounds,those which make up the backbone of U.S. trade infrastructure and logistics.
Such as this Kenworth W900:
The following charts of Wabco and Paccar show just where the pain is most acute today:
What happened? Nothing short of a complete disintegration in the heavy trucking sector.
No wonder demand for liquid fuel is down and oil is below $37 as I type.. but we are constantly told, everything’s just fine, China will come to the rescue yet again. Yeah right….
In China, responsible for about half of global coal demand, use of coal in the power sector fell more than 4 percent in the first three quarters and imports declined 31 percent. Since the end of 2013, the country’s electricity consumption growth has largely been covered by new renewable energy plants.
“The coal industry likes to point to China adding a new coal-fired power plant every week as evidence that coal demand will pick up in the future, but the reality on the ground is rather different,” according to the report. “Capacity utilization of the plants has been plummeting. China is now adding one idle coal-fired power plant per week” according to a report released Monday by Greenpeace.
Emissions are even reported as going down….. good news for the environment, but a sure sign the economy is in collapse mode now…..
Researchers at the University of East Anglia, UK, and the Global Carbon Project found that carbon emissions could decline by 0.6% in 2015, a departure from a decade of growing 2.4% per year. The research, published in Nature Climate Change, attributes the decline to a reduction in China’s coal consumption as its economy slows and it moves to cleaner, renewable energy sources.
“China is trying to deal massively with its air pollution problem,” says study co-author Corinne Le Quéré, director of the Tyndall Centre for Climate Change Research at the University of East Anglia in Norwich. “And its renewables are growing very fast.”
The results are in line with a pair of analyses released earlier this year by the Netherlands Environmental Assessment Agency and the International Energy Agency, which show the rate of global emissions growth slowing significantly in 2014.
Interesting times indeed…..