Daily iron ore price update (up)

Find below the iron ore price table for July 4, 2103:

Capture

I’m doubtful that we can get to $130 here but on we go. Not sure why the 12 month is rallying. Nothing has changed in that time frame.

David Llewellyn-Smith
Latest posts by David Llewellyn-Smith (see all)

Comments

  1. $130 USD is $144.50 AUD with the dollar at 90c.
    $130 USD is only $118.20 AUD with the dollar at $1.10.

    It makes a big difference, especially for the likes of FMG.

  2. I would not be surprised to see $130+. Some supply issues re Vale and Fe benefiaction improving demand particularly for BHP/FMG and most steel makers holding only two to three days supply – unless they cut production looking positive.

  3. Here’s an interesting fact using data obtained from the national bureau of statistics of China:

    At the end of CY2012 China had (all units are in sq.m):

    • 852,480,000 of Office Buildings and Buildings for Commercial Business space under construction.
    • 86,850,000 of Office Buildings and Buildings for Commercial Business space available for sale.
    • 100,130,000 of Office Buildings and Buildings for Commercial Business space were sold.

    CY2012: http://www.stats.gov.cn/english/pressrelease/t20130118_402867355.htm
    YTD May 2013: http://www.stats.gov.cn/english/pressrelease/t20130613_402903499.htm

    Adding together under construction and for sale we get 939,330,000 sq.m of Office Buildings and Buildings for Commercial Business as a proxy for total inventory.

    Dividing this by total sales for the year the ratio is 9.38.

    Assuming sales don’t rocket and no new floor space is added to the pipeline then it would take 9 years to clear this inventory.

    YTD sales of Office Buildings is 35.5% higher relative to last year and sales of Buildings for Commercial Business is up 11.8%. Sure pretty big rises but if you assume a 40% rise in sales across both types over 2013 the ratio is still 6.7 years (again assuming no new starts).

    I don’t work in commercial real estate but circa 7 years worth of sales pretty high to me.

    It’s also interesting to note that Newly Stated floor space for these two types have only grown by 1.8% and -1.4% respectively year to date. So either developers still have a lot of inventory they need to clear or are not too optimistic about future sales growth (maybe both) and are holding back new starts, that’s my guess anyway.

    Recent Bloomberg article also mentions oversupply concerns and high vacancy rates by end of next year as new supply comes to the market:
    http://www.businessweek.com/printer/articles/542078?type=bloomberg

    • Vacancy rates in some less affluent cities could surge to more than 30 precent by next year from as low as 6.8 precent in the first quarter this year, Cushman forecasts
    • While “it may be debatable whether China’s housing market is oversupplied, there’s consensus that China’s commercial property sector is indeed,” said Jinsong Du, a Hong Kong-based property analyst at Credit Suisse.

    So the question is what happens to iron ore demand and ASEAN steel producers if/when office/commercial property construction slows down? If China were to exports 10% of its annual steel production (in response to weak domestic demand) then that’s equivalent to 70% of Japan’s (the world’s second largest steel producer) annual production. Not hard to see a trade war brewing and there’s not much love between China and Japan.. in times of stress the Politburo will also likely try to take the focus off domestic issues and instead create a common enemy to distract the masses.

    Residential property is the main driver of steel/iron ore demand but I wouldn’t dismiss the impact a potential slowdown in the commercial space will have.

    • migtronixMEMBER

      Thanks for that great breakdown mate. I hear what your saying re: reso vs comm RE but I agree with you, who moves somewhere and doesn’t buy anything (that is to say how can residential go up even as commercial drops)?

      Very enlightening

    • 250-300m ppl will move to the cities over the next decade. It’s common sense and china sees it…. If you wait to build it, you will never do it fast enough. These projects take years to do. My best guess is about 2-4 yrs from now we’ll see another major push of development that will last into the early 2020’s… From there the mega build out will be done. By no means will production fall way off, but it’ll drop from about 1-1.3b tons to around 800-900m.

      • migtronixMEMBER

        You certainly have a point but why would they keep building when prices are a premium – a premium they engineered