Macro Nugget: China is killing the commodity super cycle
Low margins and high stock levels mean that China will export its excess capacity.
Low profit margins and substantial inventory levels suggest that China may export its surplus capacity. Consider the metal industry, where steel producers have faced negative margins for the first time since 2015, indicating major changes in commodity markets. The probable result of these reduced steel margins in China is a reduction in costs (due to the lack of demand at higher prices), which will impact iron ore prices and the countries that export it. For more on Chinese overcapacity in commodities see here.
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