These two Great Graphics were created on Bloomberg. The first shows the price of crude oil (white line) and the JOC-ECRI index industrial metals index (yellow line). The metals included are steel, Copper, Aluminum, Zinc, Lead, tin and Nickel.
The two-times series were indexed to levels seen twelve months ago. They both moved largely sides for the first half the year. The divergence became evident in Q3 and accelerated in Q4.
If there was a significant demand shock, the world economy slowing precipitously, one would expect a closer tracking of the two. That this did not take place, offers a prima facie case that decline in oil prices is more about an increase in supply than a drop off of demand. This runs contrary to some media stories that have see weak demand as the key causal factor.
Still, the price of industrial metals has fallen. It is off by about 10% since mid-year. The lower chart shows that industrial metals index and the China's official manufacturing PMI Index. Re-indexing the PMI was not very helpful. The decline in the China's manufacturing PMI has coincided with the weakness in the industrial metals. China will release its December reading of its manufacturing PMI on December 31. It is expected to have slipped to 50.0 from 50.3. If so, this would be the lowest reading since September 2012.
