Find below the iron ore price table for January 31, 2013:
And the chart:
So, once again defying the doomsayers, 12 month swaps for the miracle commodity have broken out to a new high for the move and put a rocket under spot.
More support was found in rebar futures (though no move in spot), which poured it on across the curve and are making a mockery of my base case that China will weaken again into the second half (which is to be expected, reflexivity and all that):
Let’s revisit the seasonality issue around Chinese New Year. Here’s a seasonal chart from Bloomie:
As you can see from the small sample we have, Chinese New Year dips tend to arrive in mid-February regardless of a date that jumps around between the last week and January and mid-February for the actual event so its too early to call it off.
But there’s no doubt that right now there’s life in these markets.
How big is the swaps market? Is it possible that the swaps market simply follows, rather than predicts spot prices?
Not easy to gauge this relationship. Lately the swaps have being doing a pretty good job of not following the spot market but the spread between them is so big now that the longer spot stays high the more pressure there is to raise swaps.
More to the point, previously swaps have been hopeless at forecasting the 12m price.
Go figure.
You keep forgetting we’re the lucky country, you need to add that extra dimension to your analysis.
A little more from Platts:
http://www.platts.com/RSSFeedDetailedNews/RSSFeed/Metals/8105992
Has anyone run the correlation on 12-mo swaps and spot with an x-day lag on the 12-mo swap as it looks like a short term leading indicator. If so, I would be keen to see if. If not, if you have the raw data I am happy to run the numbers.
Thanks
Andrew
andrew@afcrawford.com