The hysteria gripping the iron ore market is fun and a great opportunity to get set for the next down leg. It is also a chance to consider what the ultimate bottom will actually look like. It won’t be like this, from Business Insider:
Something is up in the iron ore market and it’s good news for Australian miners and Joe Hockey’s budget to be delivered on May 12.
Since bottoming on April 10, September Dalian iron ore futures have rallied 11%. A large chunk of that last night with the price up around 16 points from where it was late yesterday afternoon as Australian markets closed to settle at 414.5 for the September contract – up 3.24%. That’s a bigger rise than the Nymex futures or the China 62% fines import price, says Ray Attrill, NAB co-Head of Global FX Strategy.
…That’s good news for miners and great news for Joe Hockey who recently said iron ore had no bottom.
What it will resemble is a peaceful and lonely lake full of silence as interminable years roll by with the major miners struggling to eke out paltry returns on equity.
Joe Hockey should keep his $35 forecast, though it is FOB and therefore too high at $41 spot equivalent.
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.
