Here are the iron ore charts for May 7, 2014:
As I write this I’m skipping through a field of daisies on a bright Spring day.
Paper markets are tumbling like lazy drips of sweet honey from the dewy rim of a golden chalice. 12 month swaps have cracked the carapace of Winter ice and the scent of new life fills our nostrils as prices roll, giggling to their lowest since 2012. Dalian 6 month futures are in full bloom on shorter duration so holding up better on decent steel production even if reclining comfortably on the springy turf. Rebar futures have birthed the river daughter of lowest ever prices.
Physical steel prices are swooning on fecund production. Inventories are as firm and warm as a fresh cooked apple pie, and the Chinese property sector, which absorbs half of steel output, dances blithely on the river’s edge, contemplating a dip. Production rates are probably at the high point of their golden ziggurat for the year right now. Spot iron ore is 40 cents above its lowest reading since 2012 and appears destined to go skinny dipping with its lover hand-in-hand. Sub $100 beckons as the blossom does to the bee. The Baltic Dry capesize component has given up its foolhardy work already, and relaxed 1%. Iron ore majors are dancing, dancing, dancing around the May pole of production like its 2007 while the great port pile of saccharine sugar benignly overlooks us all.
The quotes emanating from the doomsayers of the Singapore Exchange iron ore conference can’t dent this mood:
“The urge to expand has been curbed,” Wang Xiaoqi, vice president of the China Iron and Steel Association told an industry conference. “Companies are no longer expanding capacity. They are putting an emphasis on environmental protection.”
…”China’s steel industry is faced with great pressure and many trading companies and mills are going for offshore financing to support themselves,” Zhang Dianbo, assistant president at Baosteel Group said at the conference.
“There will be more defaults happening but this is not the mainstream,” Zhang said when asked if more steel firms will go out of business. Baosteel has forecast China’s total crude steel output will rise 3.8 percent in 2014 to 809 million tonnes.
“The iron and steel industry has entered a real winter,” said Yang Siming, chairman and chief executive of Nanjing Iron and Steel Group.
“There is excessive production capacity, the growth in steel consumption is slacking, companies are losing money and facing tight credit, bankruptcy is emerging,” he said.
Flourish, my friends, as the Spring of lower prices is born.
