With Chinese markets still closed we’re relying exclusively upon Singapore futures. The 12 month swap fell again yesterday, down 0.13 cents to 111.06 and close to breaking its July low when iron ore spot reached $103.
In news, the AFR reports on fears that China’s holiday may prove a trigger for falls in spot next week:
“Chinese steel mills would have been restocking in anticipation of the holiday,” Platypus Asset Management resources analyst Anna Kassianos said.
“There’s a risk this is the catalyst for a pull-back in the iron ore price.”
In 2011, the golden week was the beginning of a more than 30 per cent plunge in iron ore prices, from $US170 to $US116 a tonne during October.
The price rebounded to $US147 a tonne by mid-November, as steel mills took advantage of the cheaper product after running down stockpiles.
But steel mills have lower stockpiles than in previous years, meaning any drop in the iron ore price is likely to be less dramatic.
“I don’t think we will see a major pull-back this time,” Ms Kassianos said.
CLSA commodity strategist Ian Roper said trading activity had been subdued in recent weeks, as “[steel] mills’ confidence in the recent recovery in steel prices is clearly fading and many participants are describing the market as currently directionless”.
“Mills are hoping for an upturn in demand after the October holiday but we believe there is a strong likelihood these expectations will fail to be met, with negative consequences for steel and iron ore prices,” Mr Roper said.
I agree this is likely with the swaps market setting it up.
As well, Rio yesterday officially opened its Cape Lambert port expansion:
WEST Australian Premier Colin Barnett says he expects the reinvigorated iron ore market to drive further growth in the state’s mining industry, countering wide perceptions that the mining investment boom has passed.
Speaking at the official opening of Rio Tinto’s expanded Pilbara port and rail facilities at Cape Lambert in Western Australia, Mr Barnett said he believed Rio would push ahead with a further major expansion of its export capacity in the coming years.
Yesterday’s opening was a major milestone in Rio Tinto’s $US11.6 billion expansion of its Pilbara iron ore export capacity from 220 million tonnes a year to 290 million tonnes. The company is expected to decide by the end of the year on whether to push ahead with a further expansion to 360 million tonnes, although some investors have called for caution amid concerns the global iron ore market could move into oversupply.
Mr Barnett tipped Rio to give the further expansion the green light.
“Rio will time that (expansion to 360 million tonnes) according to the market, but I’ve got no doubt they will achieve that well before the end of this decade,” Mr Barnett said.
It’ll be much sooner than that. The AFR reports that Rio’s iron ore boss, Ian Harding reckons:
“I remain very confident about China’s need to continue to expand its economy, build houses and transition from very low-rise accommodation to much more steel-intensive structures like skyscrapers and all the other infrastructure that goes with modern cities,” he said at the opening of the Cape Lambert Port B facilities, part of the $US11.6 billion project to lift annual production from 220 million tonnes to 290 million tonnes.
“There are still many, many years to play out and that underpins the work that goes on here today.”
You wouldn’t expect him to say anything else as he keeps the heat on aspirants.
