Here are the iron ore charts for March 10, 2014:
No need to adjust your television set. The prices are correct. Rebar futures fell to their lowest ever price as well. Obviously the 2012 low at $86.70 is the last remaining support for spot and I’m having trouble believing we aren’t going to plough straight through it as well.
For all of the spectacular crash in iron ore spot, it is the rebar fall that gets me. Chinese steel prices collapsing to record lows says something rather ugly about underlying demand. We haven’t yet absorbed the overnight Chinese credit data either, which was weak.
From Reuters:
The sustained slide in steel prices suggests more downside risk for iron ore, traders said.
“Mills are more reluctant to buy iron ore in this situation, and we will see iron ore continue to drop in the next few days. We may break $100 in a very short time,” another trader in Shanghai said.
No shit. This is the capitulation of the port stock hoarders I’ve been worried about for months. Chinese mills will be also be madly destocking now and this will end. But those that have built the great port pile via leverage are now under water and it will be they that are dumping prices. It’s impossible to know how much is driven by banks pulling lines of credit and making margin calls but some of it at least seems likely!
The problem is that so long as there’s no hope of a bounce in underlying steel demand, the edifice of ponzi finance that’s built the giant port pile will implode. Here it is again:
If they choose to let this run, Chinese authorities are in a position to break the iron ore speculator cycle permanently. So, I ask you, why would they stop it?
Unless new stimulus appears, the subsequent bounce from this rout, when it comes, is going to disappoint in price terms as well. And as new ore supply rolls out in the months ahead, any rebound will hit a tsunami of raw material product.
The long-postponed reckoning of the miracle commodity appears at hand.
