Here are the iron ore price charts for July 4th, 2014:
Paper markets were mixed with Singapore and rebar futures pulling back while Dalian powers on. Physical is mixed too with spot closing the 12 month contango on a good day but rebar average is falling again and the BDI capesize dropped another 3.5%.
For texture we turn to Reuters:
Chinese mills are purchasing spot iron ore cargoes to replenish stockpiles and traders are taking positions hoping the market has already hit bottom, although brisk supply threatens to stall a rally in prices.
“Steel mills in China need to buy iron ore because their stocks are low. But their demand is not enough and after this round of buying, prices will go down again,” said Cao Bo, analyst at Jinrui Futures in Shenzhen.
“The increase in the rate of supply is higher than the rise in demand,” said Cao.
…”Improving sentiment in China, along with looser credit conditions and stronger fundamentals, has seen the market take positions with the expectation that prices are to improve in July-September,” Australia and New Zealand Banking Group said in a note.
But some iron ore traders were cautious and not buying cargoes at the moment.
“We’re just selling cargoes from one mill to another. Some mills are still unloading some cargoes from their long-termcontracts to get their money back. If they need iron ore urgently they can buy from ports,” said a trader in Shanghai.
Chinese steel mills have been cutting back on long-term iron ore contracts in favour of cheaper spot cargoes, confident that beaten-down prices are unlikely to rebound strongly amid plentiful supply.
Fundamentals my butt. The PMIs have stabilised and Chinese mills may be restocking a little but so long as rebar keeps falling this is market not economic action. Traders are engineering a pump and dump and I reckon miners are rationing supply a little (seen in falling Port Hedland shipments).
Even on these dynamics, $100 still looks like the ceiling to me.
In broader news, India is back and more supply is coming. Also from Reuters:
India’s Sesa Sterlite Ltd expects its iron ore output to surge six fold this fiscal year as it resumes production in Goa in September after a 19-month mining ban in the state, an executive of the country’s top private iron ore miner said.
A pick up in production as mines in India’s biggest iron ore-exporting state restart could hurt global prices of the steelmaking raw material .IO62-CNI=SI that have already lost almost 30 percent this year in an amply supplied world market.
Sesa Sterlite’s total iron ore output from India, where it operates in Goa and neighbouring Karnataka, is expected to reach 9.29 million tonnes in the year to March 2015 from about 1.5 million a year ago, Aniruddha Joshi, a vice president at the firm, told Reuters in an interview on Thursday.
Most of the output will be exported as Indian steelmakers are not keen on buying the low-grade ore from Goa at global benchmark prices, Joshi said. The country is currently the world’s tenth largest exporter of iron ore.
Most iron ore models have this registered already though the output may be a little higher than some are expecting. Goan ore is low grade but it is cheap so it’ll start to flow alright and will do the sub-benchmark producers no good at all.
