China's interest rate cut to weaken metals and commodities prices further

We believe that metals & commodities prices will weaken further due to China's surprise interest rate cut as Chinese Yuan will depreciate further against USD. This is negative for metals and commodities as exports from China will get further boost depressing metals prices. This also means that Chinese economy is much worse than the official data suggests and no amount of stimulus would help Chinese economy. In our view, China should allow natural course correction of its economy by stopping support to unviable and surplus capacities across industries. This will be painful in the short to medium term but will make its economy more robust in the long term.

We also believe that this will spur Indian government to impose safeguard duty or antidumping duty across all kinds of steel products including long products to protect Indian steel industry.Currently there is 20% safeguard duty on HRC(Hot rolled coils) steel imports in India in addition to average 12.5% import duty on imports of all steel products in India. Many countries across the world will now move faster to impose anti dumping duty on Chinese exports to protect their domestic industries.