Daily iron ore price update (crunch)

Advertisement

Find below the iron price table for December 13, 2013:

frbsb

And the charts:

dfsbbr
dfbsdbf
Advertisement

Rebar futures were down sharply, however. Six months Dalian futures were smashed to their lowest point:

fdbvsd

So what happened? From Reuters:

Advertisement

A number of steel mills in China’s top producing province of Hebei have been ordered to shut some of their facilities to limit power use as Beijing steps ups efforts to address air pollution.

Hebei produces about a quarter of China’s output, which reached a record 716.5 million tonnes last year. The closures are in Wu’an city which has an annual crude steel capacity of 40-50 million tonnes.

…Even before the closure of some mill facilities in Hebei, China’s steel output was dropping in response to leaner demand as falling temperatures in the country curbs construction activity.

Average daily crude steel production dropped 3.3 percent from October to 2.029 million tonnes last month, based on data
from the National Statistics Bureau.

“I think the stockpiling is still going on but the volume is not as strong as we’ve seen before,” said a trader in Shanghai.

Hmmm, well, it most certainly is. Although average days of supply at mills is still stable, port inventories are now going nuts. I normally use Bloomie data for ports, but it’s isn’t up for last week so here’s MySteel instead (which is little higher) hitting 88.7 million tonnes last week:

vsvdfvw

That prices aren’t rising as the year end restock transpires, albeit at ports not mills, tells you something about an excess of supply in the market. If China has the slightest hiccup in demand – through reform activity or a slowing in growth – iron ore prices are very vulnerable to correction.

Advertisement

I still think firm prices can carry into January on the seasonal restock but given elevated iron ore equities, it looks like now is the time to be short for what comes after.

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.