Materials and China

Today ISA looks extensively at potential timing in the materials space.

Material stocks have been some of the biggest movers since China announced minor additional infrastructure investment last week Friday.  In fact, the only stocks to move more than the precious metals complex have been the heavily shorted materials names.  ISA is going to try and paint a picture in which a bottom for these stocks may remain ahead.  Either way, expect us to continue to monitor developments.

China media suggest no major stimulus moves at MarketwatchDoes the world really need China’s rapid growth?  FT Alphaville.

The Chinese Hangover:  As Infrastructure Spending Drops, so does Chinese Demand for Steel at Pimco.

Iron ore and coking coal are the chief ingredients:  China floods globe with below-cost steel as output overwhelms at Reuters.

China’s announced stimulus from a week ago sparked a ginormous rally in related shares.  Already, however, Mini iron ore rally melts away (Mining).  More at Reuters.

“The reported 24% cut matches the steep fall in spot coking coal prices, which have slumped to around $165 a tonne for the key steel-making fuel…”  Mining Weekly

Resource rich Australia became a high cost jurisdiction:  Mining WeeklyAustralian coal royalty rate hike boosts prospects of US producers at SNL.

As my brother would say, “I completely disagree” yet, By 2015 Hard Commodity Prices Will Collapse; Australia’s Mining Boom Dies from Mish.

I hesitate to post sensationalist headlines as they can adversely affect investing.  But the info was good:  CHINA CRASH 2012: Here’s Why It’s Finally Happening at Business Insider.

Getting bullish:

Materials Making it Back Home by chessNwine.

As a long time ‘industrialization of China’ bull, continued investment deferments like Vale to postpone developmental projects (Mining) are long term positive.

One theory:  “Iron Ore prices at such levels…competitors will have to close up shop reinstating their cartel capacity until rising prices bring more supply back online…there is a real chance we will see prices take the next leg down in the coming 3-6 months and we will use this opportunity to load into RIO and BHP on an increased dividend appeal for a longer term emerging market play.”  IQ Market

Print and read with your Saturday morning coffee:  Don Coxe’s August Basic Points.

China’s next act by Frank Holmes.


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