The frenzied trading that smashed Chinese commodity markets through the roof in the last month has begun to unfurl rapidly as authorities crackdown on the speculative fever and force exchanges to curve excess 'churn'. Of course, there are still some who cling to the belief that any of this was 'real' demand, real buying, and real economic growth (just don't look at The Baltic Dry in the last few days) but, as Bloomberg reports, it was nothing but "churn baby churn" as trading volume exploded but open-interest remained flat.

“With more speculators being let in on this secret, more money poured in the game,” Fu said. “Prices went higher and higher with explosive
growth in trading volumes.”

As Bloomberg reports,

The slowdown marks a return toward normality after a frenzy that drew comparisons with the credit-driven stock market rally last year that preceded a $5 trillion rout. Investor appetite has waned after the exchanges raised transaction fees and margins amid orders from regulators to limit speculation.

“It’s pretty crazy to see such a quick move in trading volumes, compared with historical levels,” Zhang Yu, an analyst with Yongan Futures Co., said by phone from Hangzhou in Zhejiang Province. “Some investors are exiting after the exchanges’ measures.”

Crazy Indeed...

Open interest, or the amount of outstanding contracts at the end of the day, has remained relatively unchanged throughout, indicating that the trading was short-term speculation, with traders holding positions for a few hours and cashing out before the end of the day. At the peak of the trading boom, daily aggregate volume across the contracts was more than four times open interest. It was 1.4 times by May 4.