Find below the iron ore price table for May 6, 2013:
And the charts. For spot:
12 month swaps:
So, we have a bounce but it so far failed to undo the technical damage to charts enough to conclude last week’s plunge was a false break.
Rebar average:
And rebar futures:
It looks to me like we’re probably past the worst for Chinese steel prices. The next chart is of rebar inventories:
So, pricing power should slowly return.
Will that stabilise ore prices at current levels? Possibly, but last week’s port inventory charts hint that maybe not for long if at all. Indian iron ore appears to be returning. The general port stock chart stabilised:
And India source stocks rose more than we’ve seen in some time:
The big news today is that Australia’s two mad iron ore majors are locked in a battle to build to the death. From the AFR:
Rio Tinto and Fortescue Metals Group are confident they will keep growing their Pilbara iron ore operations despite a concerted push by many investors for more cash to be returned.
Rio chief executive Sam Walsh told an analyst briefing in Sydney that the miner’s board was likely to approve $US4.3 billion of spending on iron ore mine expansions needed to take capacity to 360 million tonnes by 2015.
And at the opening of Fortescue’s Firetail mine in the Pilbara, chief executive Nev Power outlined plans to boost production by a further 10 per cent to 170 million tonnes at a minimal cost after it completes a $US9 billion expansion plan by the end of this year.
Both mining companies indicated they are well aware that investors are seeking higher dividends and share buybacks, particularly after Woodside Petroleum issued a special dividend and raised its payout ratio last month.
What a prisoner’s dilemma. If one stops building the other takes the market share. If both keep building the glut will be epic.
A long term thinking BHP will be laughing its head off. These two iron ore junkies are going to blow up the global iron ore price and themselves in the process. One more time, here is the demand and supply chart ahead for iron ore (you should put this on your wall Brett Cole):
When the ore hits the fan in the next year or two, BHP will have its pick of assets.
