On it rolls down a very steep hill. In China, rebar futures have opened up 1% down today and Dalian six month iron ore futures have plunged 2% to their lowest ever level at 689 yuan:
Miners are down across the board. AGO has well and truly taken out terminal support at 75 cents, last at 70 cents.
FMG and RIO both continue to hold up better than they should, down 2.2% to $4.44 and 1% to $59.48 respectively, but both are still above the lows of the past few weeks despite the iron ore price being materially lower.
Here is the updated relative performance chart:
Markets are clearly expecting some kind of move to restock by mills. Comments from The Australian are typical:
Iron managing director Ken Brinsden said despite the iron ore price cooling on the back of increased supply in the market he was optimistic because the demand side did not look as if it had materially changed.
“The supply side has absolutely increased and it will take some time for those tonnes to find their natural home,” he said.
“But I firmly believe they will displace some other high-cost production in which case the buying tension re-emerges.”
Mr Brinsden said while anyone expecting the price to go back to $US150 a tonne would be disappointed, he believed there was a good chance the price could stay in the range of $US100- $US125 for years to come. “Our challenge as a business is to take advantage of our good assets in the ground, our good people, make sure we look after our cost base and that we’ve got a healthy balance sheet so we can weather the storm and come out the other side,” he said.
Despite the iron ore price fall, ANZ analyst Mark Pervan said there were signals emerging of better seaborne prices, with steel mills running low inventories and cheaper inputs helping profit lines. “Weaker iron ore prices has seen stronger interest in seaborne material from Indian steel producers,” he said.
“JSW Steel is set to import additional higher-grade ore to offset shortfalls in domestic supply.”
I wish you good fortune, Mr Brinsden. Mark Pervan has been behind the curve all year. The Indian interest is not enough turn the supply situation around and Chinese stocks are low but far from terminally so and could keep falling for several weeks yet. The outlook for the second half is bad as property crumblesso they may just do it.
Meanwhile, the Australian dollar has just broken up through 93 cents and is ripping higher!
Bottom fishing this market is for the foolhardy.
