Tianjin benchmark sank another 4.7% to $50.20. Dalian managed a little rebound overnight. RIO and BHP gained in London which makes little sense to the insider but markets seem comfortable with the notion that $50 is the new point of control for iron ore and any fall below that level will be brief. The argument behind this is that there’s about 50mt in China that drops out below that level.
Markets are wrong as usual. The only question is how long will it take for us to drop the price deck to a new equilibrium level? Given we’ve already added around 150mt in supply since late last year that can survive at $50 we’ll need to go lower to knock it out again. Moreover, there are growing questions over the real state of demand, as illustrated by the ongoing collapse in the steel price.
More interesting than the overnight iron ore data was the new CISA fast data on steel output which fell -0.6% in early May to 1.71mt per day despite fabulous margins:
