Singapore: Commodities markets tumbled in Asia on Monday as fears spread that a more severe slowdown in China would pull down other economies in the region, denting energy and raw material consumption. Chinese stock indices like the CSI300 and the Shanghai Composite Index tumbled on Monday morning, also dragging on Japan's Nikkei index as worries over slower growth in the Chinese economy intensified.
The Aussie dollar fell as iron ore miner Fortescue saw its annual profits collapse almost 90 per cent. The weak sentiment in Asia hit oil, the dominant fuel for transportation and the most traded commodity. The two most important crude futures, U.S. West Texas Intermediate (WTI) and the global benchmark Brent, marked fresh 6-year lows on Mondays to levels last seen during the peak of the credit crunch of 2008/2009.
US West Texas traded well below $40 a barrel and Brent had fallen under $45 per barrel. In coal, the most common source for electricity generation, benchmark API2 2016 futures had already hit 12-year lows last week, and underlying physical benchmarks like cargoes from Australia's Newcastle or South Africa's Richards Bay terminals have dropped to levels last seen before the 2008/2009 boom and bust.
Although analysts said price rises could happen as investors look for bargains, general market fundamentals were still weak and could result in further downward price adjustments. "Global investor sentiment dipped in August to the lowest level since we started the survey," Morgan Stanley said, adding that an adjustment process was likely to be long and painflul.
Barclays said that "given the structural negatives of a slowing China, oversupply and a strong dollar, it may not be too long before the long-term bearish trend reasserts itself." The market weakness is not just affecting energy prices, but also industrial commodities. Copper benchmarks were trading around the $5,000 a tonne on Monday morning, at levels similar during the peak crisis months of 2008-2009, and China's iron ore index, despite a recovery recently also remains near record lows, trading around $55 a tonne.
The rout in commodities market has also spread to sectors that have so far been performing well. The MAC global solar index, which soared during the first months of the year, has almost halved in value since April, pulled down by the sharp drops in Chinese stock markets.
