Daily iron ore price update (mean reversion)

David Llewellyn-Smith

Tuesday 28 May 2013

Find below the iron price table for May 28, 2013:

Another tough day at the office.

Here are the charts for spot and swap:

The spreads are swiftly reverting to mean. Spot to swap is now within historic ranges:

My estimation is that 5% is an appropriate spread at this price range.

For the spot/rebar spread we have further yet to travel:

-30% is about what I’d expect for this price range.

The question for this move is are we going to revert or overshoot? The 12 month swap is still holding up so I won’t panic until it breaks lower. But clearly the pressure in markets is growing for now.

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.