what up with DJP ?

[JohnEyles]

Been looking to increase my commodities position in DJP,
and it's had a good-sized drop today - could be a good time.
Anyone understand what's going on ? Big drop in oil ?

 

[brewer12345]

Commodities taking a beating. Futures market is betting that there will be a slowdown in demand. Why? Might as well ask why the sky is blue.

 

[JohnEyles]

Commodities taking a beating. Futures market is betting that there will be a slowdown in demand. Why? Might as well ask why the sky is blue.

Hey man, I'm asking you to look into your crystal ball and tell me whether to
wait or not !

 

[Brat]

Observations of an old lady sitting on the Pacific rim:

China's demand for steel and cement should back off a little once they are in the finish-out phase of prepping for the Olympics. On the west coast a breather from those prices would be much appreciated. However, long term, the demand for those commodities by China will not abate. One activity that put substantial supply of rolled steel on the market 5 to 10 years ago was the scraping of old ships (most go to India). I think that cycle has peaked. With the increase in global trade the demand for ship construction has increased, and there is construction boom on the Pacific rim. Notice that a Russian firm wants to buy an Oregon steel firm?

So, if your commodity of interest is steel or cement I think you are good for the long term.

Oil prices have gone down from insane to ridiculous (mild winter?!), but they are not about to get reasonable. The one element in the oil company mix is the workout of contracts with Russia and political instability. The oil business should continue to be profitable, those with reliable crude contracts just about print money.

Composites are replacing aluminum in airplanes (yet to see how composites hold up long term), so firms like Alcoa need to adjust their product mix - bauxite prices may be under pressure.

Lumber prices have gone down because of slackening new home construction, so standing timber prices will go down. China doesn't seem to use lumber for construction (warm climates, termites/dry rot?).

Silver, gold - no opinion but gold seems to correlate with uncertainty.

So... WHY THE HEY DID THE MARKET BACK OFF SO MUCH THIS AFTERNOON?

 

[brewer12345]

I think commodities went the floppy wobbler because the market was catching up from several days of being closed. Simple as that.

FWIW, scrapping of just about any kind of cargo carrying ship is at just about record lows, so there hasn't been much supply from ships in a few years. Any old bomb that can make it to the next port can command embarassingly high rates, so they keep sailing.

 

[Brat]

Yup. Many single hulled tankers were scraped a few years back. Dang!! There went a lot of lovely fittings...

I recall the old Golden Bear, Cal Maritime's training ship that was scraped ~ 10 years ago. The only un-holy ship left from WWII, held together by paint some said. Came the day the Captain said that the ship should not sail off shore further than a cadet could swim (in so many words).

 

[brewer12345]

I've seen increasing repots of dry bulk ships having problems at sea or imploding as they are loaded. Pull the ship up to the terminal, start dumping Gawd knows how many tons of cement per minute into the hull, and watch the 30YO rust bucket come apart.

 

[Brat]

Indeed that happens. Loading a ship is a science. It shouldn't be left to a guy with a hose just pouring bulk cargo into a hold. There is a reason why ship's officers are licenced and in the industry the Norwegian and American licences are regarded highly. Most have the economic security to refuse to sail a sinker.

It is not unusual for a ship to break at sea. If they don't have an American crew we don't hear about it, but mariners do.