The Evergrande saga reached its epilogue this morning when the $320 billion of debt company was placed into liquidation. There can be no doubt that this will have a major impact on the Chinese economy, and that the domino effect that this failure is bound to provoke will depress GDP.
One thing is certain: the commodities markets are in turmoil.
- - Some are preparing for dark days, given the scale of speculative 'short' positions. Cereals and oilseeds are leading the way.
- - Others, on the other hand, such as cocoa and sugar, are flying from record to record against a backdrop of shortages linked mainly to the vagaries of the weather.
Cotton, for once, is in a more complex situation:
- - American cotton, whose production is in sharp decline, is selling well but shipping is more difficult.
- - Production this year is down, but less than world demand. Basically, the world has produced less cotton because of the climatic deterioration caused by El Nino and global warming, while at the same time the economic crisis and inflation have reduced textile consumption.
- - The players on the ICE financial market in New York can be divided into two groups with converging interests for the time being:
- o Speculators, focused on US production, are buying cotton to take advantage of what they see as an inevitable rise in prices.
- o Producers attracted by rising prices are selling their cotton and traders are delighted to find buyers to sell their paper.
This situation may last for a few weeks or even a few months, but it could be a rude awakening...
But what is even more worrying is the situation of the spinning industry, which in many countries is hanging on by a thread because yarn prices are so depressing.
Lots of cotton for sale, few buyers, an overvalued financial market - these are all potentially explosive factors, unless there is an economic recovery in the wake of the US, whose growth rate and full employment could pull the world economy upwards.
In West Africa, the decision by Mali and Burkina Faso to leave ECOWAS, as announced yesterday, could have repercussions for cotton production. These two landlocked countries, which alone account for 40% of the continent's cotton production, could have to mint their own currency and manage increased tensions with the other countries in the coalition.
As novel as the situation may be, it is no less exciting.
Πηγή: Mambo