China’s Oil Price Impact Larger Than Iran’s

5 Comments on "China’s Oil Price Impact Larger Than Iran’s"

Davy on Tue, 14th Jul 2015 4:51 am 



Looks like China is going to impact another sector with bad-ish debt from industry over investment in capacity. The dominos are falling. It amazes me how rigged and repressed markets are. There is so much debt out there that is worthless by previous price discovery in normal markets. How long can this last without an adjustment. It appears central banks have succeeded in propping the system up but for how long?????
http://www.zerohedge.com/news/2015-07-13/miners-buried-billions-debt-after-colossal-misjudgment-demand

It’s also bad news for the global mining industry which, as WSJ reports, borrowed “heavily” in anticipation of never ending Chinese demand. Here’s more:

As forecasts predicting endless growth in China’s appetite for raw materials became a matter of industry faith, mining companies borrowed extensively to build networks of pits, railway lines and port terminals. Megadeals abounded as a merger-and-acquisition frenzy took hold. Cheap borrowing costs, thanks to low global interest rates, fueled the splurge. Now, as China’s hunger for resources ebbs and mining companies’ profits suffer amid falling commodity prices, those debts have become an albatross around the industry’s neck.

Amid a slump in Chinese share prices last week, metals such as copper and aluminum fell to near six-year lows. Iron ore at one point hit its weakest level for a decade. “There’s been a colossal misjudgment of future demand,” said Dali Yang, professor of political science at the University of Chicago. “That long boom made it especially difficult for people to expect anything otherwise. Many bought the big story about urbanization, instead of thinking how things could go bad.”

The world’s largest mining companies by market value had accumulated nearly $200 billion in net debt by 2014, six times higher than a decade ago, according to consultancy EY, while their earnings only increased roughly two-and-a-half times. Large mining companies have written off roughly 90% of all the acquisitions they made since 2007, according to Citigroup Inc. Even if top mining companies devoted all their earnings less investment spending to paying down debt, it would take up to a decade to clear the decks, according to a Wall Street Journal analysis of EY data.

Boat on Tue, 14th Jul 2015 5:38 am 



Human instinct is to always overshoot and create bubbles.

Davy on Tue, 14th Jul 2015 6:11 am 



Sure, Boat but now the bubbles risk taking us all down.

Boat on Tue, 14th Jul 2015 6:27 am 



I have never disagreed with that Davy. Many may lose their stuff, there may be riots in the street, who knows. There may be huge loss of life throughout the world. Humans are survivors. My upbeat view is 70-30 chance we muddle through climate change and avoid wwIII but not without pain. But 20-30 years down the road. When the real weather starts to hit.
Alot of doomers just pick almost every topic and somehow believe this to will take us down. That makes no sense to me.
Explain that phenomenon.

Davy on Tue, 14th Jul 2015 7:37 am 



Boat, pretty easy to turn that phenomenon back on you and the other corns. You guys generally dismiss any doom just like you did with low odds and long time frames in your comment. I see no difference in the phenomenon regardless of orientation. It is called human nature. IOW look in the mirror. I believe you are a fellow hairless ape like creature with an oversized brain just an optimistic one.