Chanos Bearish on Commodities

New York (HedgeCo.net) – In an interview with Bloomberg TV on Monday, noted short-seller Jim Chanos laid out a pretty bearish case for the commodities sector. Chanos is the founder of Kynikos Associates, a short-biased hedge fund, and he thinks the slump in commodity prices has a way to go before it is over.

The main reasoning behind the bearish view all ties back to the slowing growth in China and how production has been ramped up to meet the demand that was higher in recent years than it is now and that will create a situation where supply outpaces demand, especially for natural gas.

“All this capacity is coming on in Asia. To meet Asian demand that has actually been flat for the last three years,” Chanos said. “And we think we have a looming oversupply problem in LNG. But primarily in Australia and elsewhere in the Pacific basin, production is basically about to double in the next handful of years on flat demand. And that doesn’t sound good to us.”

Australia may suffer more than any other country as it has expanded its operations and will soon have three times as many facilities producing natural gas as it has now.

Rick Pendergraft
Research Analyst
HedgeCoVest

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