Is the iron ore fall seasonal?

A nice piece of analysis at FXStreethas caught my eye and helps explain argument I’ve been making since Q3 last year, that the end of Q’14 was going to bring trouble for iron ore. May is the worst average month for iron ore price falls:

Here is the average charted:

Note that Q3 is also weak on slowing Chinese construction and Q4 strong as restocking for the New Year output surge and as insurance against the Pilbara cyclone season. That’s why I’ve been arguing the lows may be in Q3.

FXStreet notes that the Australian dollar follows the same pattern for May.

So, yes, the iron ore price is weak in part owing to seasonality as mills typically run down raw materials after the Q1 spike. However, there is more going on this year in oversupply, the Chinese reform program and weakening Chinese property sector prospects.

Share

About the author

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.