Daily iron ore price update (simple destock?)

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Here are the iron ore charts for February 27, 2014:

iron ore
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Rebar futures rallied a little as well. Markets again have the feel of an orderly destock. Derivatives are looking for a bottom (fruitlessly in my view) and spot is melting not crashing. The panic is nowhere to be seen. That would give us limited downside with mills not likely to push days of cover too low this early in the year.

So long that’s all that’s going on. The longer that steel prices languish at these giveaway levels the higher the risk of a dump and run.

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Reuters has the detail:

Concerns over China, the world’s top user of steel and iron ore, heightened this week as local media reports of tighter lending conditions were followed by a steep drop in the yuan, which traders suspect was due to intervention by the central bank in its bid to add volatility to the currency in preparation for reform. The yuan fell below the official fixing for the second consecutive day on Wednesday.

That has dimmed the outlook for steel demand in China which was already struggling to pick up in the face of slower economic growth.

…”The iron ore market needs one positive signal, a recovery in steel prices, and we’re wondering when will that happen,” said an iron ore trader in Shanghai.

…There’s no shortage of available iron ore cargoes in the spot market but weak bids suggest buyers are in no rush to snap them up, traders said, with many anticipating prices to fall further.

…”We continue to have a bearish view on iron ore prices because the current inventory days at ports is still high at 29 days,” UOB-Kay Hian Securities analyst Helen Lau said in a note. Lau said iron ore can test $110 in the near term and could slip below $100 if credit access in China remains tight through March.

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.