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Plunging Commodities Interfere With The New World Order

Anglo American, a British company, and one of the world’s biggest miners, and a ‘producer’ (actually just a miner, how did those two terms ever get mixed up?!) of platinum (world no. 1), diamonds, copper, nickel, iron ore and coal, said today it would scrap dividends AND fire 85,000 of it 135,000 global workforce (that’s 63%!). 
Anglo is just the first in a long litany line we’ll see going forward. Commodities ‘producers’ are being completely wiped out, hammered, killed, murdered. They’ve been able to hedge their downside risks so far, but now find they can’t even afford the price of the hedges (insurance) anymore. And then there’s all the banks and funds that financed them.

And they’ve all been gearing up for production increases too, with grandiose plans and -leveraged- investments aiming for infinity and beyond. You know, it’s the business model. 2016 will be a year for the record books.

Just check this Bloomberg graph for copper supply and demand as an example. How ugly would you like it today?

And what’s true for copper goes for the whole range of raw materials. Because China went from double-digit growth to shrinking imports and exports in pretty much no time flat. And China was all they had left.

Iron ore is dropping below $40, and that’s about the break-even point. Of course, oil has done that quite a while ago already. It’s just that we like to think oil’s some kind of stand-alone freak incident. It is not. With oil today plunging below $37 (down some 15% since the OPEC meeting last week), it doesn’t matter anymore how much more efficient shale companies can get.

They’re toast. They’re done. And with them are their lenders. Who have hedged their bets too, obviously, but hedging has a price. Or else you could throw money at any losing enterprise.

…click on the above link to read the rest of the article…

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