Here are the iron ore price charts for July 11, 2015:
Surging Dalian futures failed to translate into spot gains. Tianjin benchmark iron ore price for rose just 30 cents yesterday to $65.40. Overnight Dalian pulled back to 448. Singapore 12 month swaps still don’t buy the rally. Rebar average continues to bleed out.
The other key release was China’s CISA mid-May steel output data which tanked 2.6% to 1.7 million tonnes per day:
Year to date steel output is down 2.25% from 2014, fairly consistent with yesterday’s NBS data indicating a 1.9% drop for May output year over year.
With this data we can safely say that the current iron ore spot price rally has no fundamental basis in steel demand. The current rally is not a repeat of the 2012 experience when destocked steel mills were hit by stimulus-led new steel demand that triggered a big iron ore restocking. Yesterday’s weak May China economic data confirmed the same. The rally is a function of an inventory cycle that will restock to much lower levels and as such much higher prices are very unlikely.
Reuters has texture:
“There’s not much cargo being offered by traders at the moment, particularly the mainstream grades being sought by mills,” said an iron ore trader in Shanghai, referring to high-grade material from top supplier Australia.
It’s a short term game of chicken until port stocks can be rebuilt.
A returning Atlas will help break the deadlock, also from Reuters:
Struggling Australian mining company Atlas Iron Ltd said on Thursday it is planning to raise capital via a placement of new shares at a heavily discounted price to key contractors, existing and new shareholders.
After a near collapse due to a slump in iron ore prices, Australia’s fourth-largest iron ore miner has recently resumed some mining operations and is now trying to raise cash to keep it afloat.
The share issue, at price of A$0.05 Australian dollars each, represents a 58 percent discount to the last traded price before the shares were suspended and is much lower that Atlas shares have ever traded, the company said.
Atlas has recently resumed mining operations at its Abydos and Wodgina mines and said mining will resume at Mt Webber in July. It now wants to reach a full production rate of 14-15 million tonnes per year from its three Pilbara iron ore mines by the year-end.
Just in time to shut them again.
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