Commodities sank to the lowest level in 16 years and shares in resources companies joined a global equity slump on concern China’s economic slowdown is to exacerbate gluts of everything from oil to metals.
The Bloomberg Commodity Index of 22 raw materials lost as much 1.8 percent to 86.2645 points, the lowest level since August 1999. Shares in miners and explorers from Glencore PLC to BHP Billiton Ltd and CNOOC Ltd (中海油) tumbled, while Brent crude fell below US$45 a barrel for the first time since 2009.
“Sentiment is extremely negative across the commodity complex,” Mark Keenan, head of commodities research at Societe Generale SA in Singapore, said in an e-mail.
“Markets are plagued by concerns of oversupply,” he said.
Raw materials are in retreat as supplies outstrip demand amid forecasts for the slowest Chinese growth since 1990. The largest user of energy, grains and metals was much weaker than anyone expected in the first half of the year, according to Ivan Glasenberg, head of Glencore PLC, the world’s leading commodity trader.
“It’s being fueled by the large drop in the Chinese stock market today, which is making people nervous about the management of the Chinese economy, which has direct implications for commodities,” CMC Markets Asia Pty chief market strategist Ric Spooner said by phone.
“It’s now basically a risk-off move,” he said.
Glencore dropped as much as 7.6 percent to a record low of ￡1.4645 in London while Anglo American PLC lost 5.7 percent. Shares in BHP, the world’s largest mining company, fell as much as 5.3 percent in Sydney to the lowest level since 2008. Nanjing Iron & Steel Co (南京鋼鐵聯合有限公司) led losses on the Shanghai Composite Index, sliding 10 percent as the gauge plunged the most since 2007. Chinese explorer CNOOC slumped 7.7 percent in Hong Kong.
Oil has sunk as producers maintain or boost supply even as a glut persists, prioritizing sales over price. Iran is to raise output at any cost to defend its market share, Oil Minister Bijan Namdar Zanganeh told his ministry’s news Web site, Shana.
Brent for October settlement declined as much as 3.2 percent to US$44 a barrel on the ICE Futures Europe exchange, the lowest price since March 2009. West Texas Intermediate in New York dropped 3.2 percent, taking its loss over the past year to 58 percent.
Copper on the London Metal Exchange lost as much as 3 percent to US$4,903 per metric tonne, the lowest since 2009. The metal is regarded as an indicator of global economic activity. Output topped demand by 151,000 tonnes in the six months through June, according to the World Bureau of Metal Statistics.
While there is speculation that market turmoil might prompt the Federal Reserve to delay an increase in interest rates, the dollar is still 16 percent higher over the past year. That makes commodities more expensive for holders of other currencies.
Agricultural commodities were not spared in the rout. Soybeans, wheat and corn extended losses in Chicago. In Malaysia, palm oil sank 3.2 percent.
“It’s always very difficult to call a bottom, and it’s a commodity-by-commodity analysis that’s required,” said Graham Kerr, chief executive officer of South32 Ltd, the Perth-based mining company hived off by BHP.
“We are planning for a couple of hard years,” Kerr said in an interview on Bloomberg Television.
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