Here are the iron ore charts for 25the April, 2014:
These charts consolidate Thursday and Friday moves. Paper markets are mixed as Dalian six month rallied on more Chinese stimulus rumours but the 12 month swap did not, a sensible enough divergence. Rebar futures bounced then fell and remain weak.
Physical markets rallied slightly Thursday then dumped Friday. Spot is shot. It could find support around $110, or not. The accumulation of idle stock at ports resumed with a spike to a record within a whisker of 111 million tonnes. They’re now stuffing the broom closets it seems. Baltic Dry capesize is flat.
Macquarie’s monthly steel mill sentiment survey is out and shows the recent pick up in spirits. From Platts:
China’s steel sector is exhibiting stronger mill margins and sentiment in April that may soon lead producers to “step up purchases of both iron ore and coking coal,” Macquarie Bank said Friday.
Mill inventory of iron ore is stable while coking coal destocking is still evident, the bank’s report said, citing its monthly survey of mills and traders of steel and iron ore.
A return to stronger raw materials purchasing would help support prices, but the bank said expected steel demand growth and restrictions in place on steel production in China may see mill margins benefiting the most.
“As we have previously argued, the end of destocking should be positive for raw material prices over the coming months,” it said. “Although with steel demand looking stronger than expectations and with continued production restrictions still in place, we wonder whether steel mills might be the biggest beneficiaries of the apparent upturn in market conditions.
…Construction and infrastructure were the strongest sectors for steel demand over the last two months, it said.
As I argued this morning in another post, the former will fade as the year goes on, the latter accelerate and the balance will be weak demand growth.
This weak trade is underlined by the increasingly heated rhetoric emanating from the Port Hedland tug dispute. From the SMH:
Fortescue Metals Group chief executive Nev Power says the world’s fourth-largest iron ore producer will have to shut its mines in days if tugboat crews walk off the job, a move he said would hurt government revenue and damage the nation’s reputation in Asia.
In a stinging rebuke, Mr Power said the three unions representing the tugboat crews – which have applied to take protected industrial action through Fair Work Australia – are holding the state to ransom. It could cost jobs across the Pilbara, he said.
…A ballot of workers is being conducted, with a decision on whether to take action expected in about a fortnight.
…The militant Maritime Union of Australia is representing deckhands, which are understood to earn about $140,000 a year. The Australian Institute of Marine and Power Engineers manages the engineers while tugboat masters, who are understood to earn up to $300,000 a year including allowances, are represented by the Australian Maritime Officers Union.
The claims by the different workers vary and are not all focused on pay, with some workers concerned that they are regularly working more than 12 hours a day.
One wonders why the big miners keep exposing themselves to labour bottlenecks. Did they not think that as volumes rose so would tug demand? Why didn’t they train and invest in advance?
Anyway, that iron ore can keep falling with this kind of looming supply threat bodes poorly for market prices in the medium term. Conversely, the ballot could support prices short term.
