All quiet on the ore front yesterday with little movement anywhere (though swaps haven’t updated yet):
As some buying support appears to be coming back into the market, I thought it worth revisiting a chart from Morgan Stanley from last year’s falls:
Take a close look at the very sensitive relationship between the iron ore price and blast furnace throughput rates. As we await traders re-entering the market, it goes to show that the speculative dimension of the iron ore price is negligible. And if most traders are physical guys, middle men rather than speculators, then that has a very important implication. When there is weakness, the market cannot clear until the fundamentals shift. Putting that another way, the economics underpinning steel production will determine prices, forget sentiment, speculation or anything else. In short, if Chinese steel demand remains subdued, prices will keep falling until ore production is cut.
