The collapse of commodities

One of the world’s largest commodities businesses: Glencore Plc felt the full effects of the reduction in value of metals in the past months. Just yesterday its share value dropped to an all-time low, falling a further 27 percent; 75 percent overall decline this year.  To quantify a further $13 billion has been wiped off its value this month increasing investor concern that it’s not shedding its debt fast enough.The company has been battered after investors retreated from commodities as China’s economy expands at the slowest pace since 1990. The Bloomberg Commodity Index last month reached the lowest in 16 years and the Bloomberg World Mining Index on Monday lost as much as 2 percent to touch the lowest since 2008. Goldman Sachs said that should commodity prices fall another 5 percent, the metrics needed to maintain Glencore’s credit rating would be out of the required range.

So what are the top six failing commodities that have caused the decline in power of some of the big names?

1   No more Gold rush as this metal continues to lose its shine.  Recently, Gold hit the lowest level value since early 2010.   With the US and Chinese Central banks increasing interest rates it has forced investors elsewhere.

2   Crude Oil – At just under $55 a barrel, Brent crude has halved from a high of $115 hit a year ago, affected by a mix of rising supply, particularly in the US, and falling demand on the back of China’s economic slowdown and lack of confidence in Europe.

3   Platinum has suffered from falling demand as the global economy loses momentum, with prices now at a six-year low and mines closing in South Africa and Central Asia.

4   Aluminum – Prices hit a six-year low earlier this month, on the back of falling demand combined with high supply, a cause of large-scale exports from its top producer, China.

5   Copper – Like aluminium, copper has fallen in price because of oversupply as well as falling demand in China, its biggest consumer market.

6   Iron ore, the main component in steel, is sensitive to any slowdown in larger economies and in particular, cutbacks in infrastructure projects.  Prices have tumbled from $190 a tonne four years ago to around $50 with Chinese Iron Ore output rapidly increasing.

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