Big iron rallies as futures give Vale the bird

The iron ore rally that took off again Friday continues today with BHP up 1.6% and RIO up 2%. FMG is down 2%. To the indexes:

This looks like pure hopium to me. The mooted Vale cut to production is irrelevant in the scheme of things. On any 3-6 month horizon big iron now looks hugely mispriced and getting more so on the idiocy spreads:

In juniorland, BCI is back at 50 cents and is still sitting dead duck:

Dalian futures have so far fallen 2% since since Vale’s announcement but are up 2 points today. I expect the steel mill restock to run a bit longer but these equity prices are discounting something far more promising.

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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.