Shares in Glencore rattled below £1.00 in trading this morning, amid a fierce sell-off in London that sent the FTSE 100 below the 6,000 mark for the second time this year. Glencore touched 99p for the first time since the company listed at £5.30 in 2011, whilst Rio, BHP and Anglo American are all falling heavily, down as much as 7 per cent.
The move was led by a fresh dive in the copper price, which has showed little signs of responding to aggressive production cuts by several of the world’s largest copper miners, including Glencore, Freeport McMoran and Poland’s KGHM, a key player in the copper market and Europe’s second largest producer.
Combined, the three companies have cut more than 300,000 tonnes of production from the market each year, equal to around 2 per cent of all mined supply, but demand-side concerns coming from China are currently carrying far greater sway in the eyes of investors.
China Tanking
On a diplomatic charm offensive, Britain’s chancellor George Osborne made bullish noises about China’s economy on Tuesday morning, whilst talking up links between the Shanghai Stock Exchange and London. But evidence increasingly suggests that China’s economy is tanking, weighing on miners and the FTSE alike.
All important copper imports were broadly flat in August, registering a barely perceptible monthly bounce of 0.8 per cent, but customs statistics overall have been unavoidably bearish. Priced in renminbi, China’s total imports fell by 14.3 per cent in August, further aggravating a 8.6 per cent drop in July. It is the tenth consecutive decline in the country’s total imports, demonstrating the strength and ferocity of China’s lurch lower.
Iron Ore
Led by Vale and Rio Tinto, iron ore shipments from Brazil and Australia meanwhile continue to rise at pace and will hit 1.2 billion tonnes next year, according to forecasts by Goldman Sachs, a jump of 6 per cent. Yet iron ore shipments into China, comfortably the world’s largest iron ore market, fell by an alarming 14 per cent last month.
Zinc imports were similarly down by 18 per cent in July whilst crude oil shipments fell 13 per cent in August. China’s PMI figures, a telltale leading indicator for the strength of industrial demand, are meanwhile sitting at their lowest level for three years. They have now stubbornly remained below the critical 50 threshold, signalling economic contraction, for eleven consecutive months.