Big iron is hurting today with BHP down -1.5%, RIO down -0.5% and FMG down -3.5%:
Can we rebound here? Credit Suisse thinks so:
Curtailments of blast furnaces have mounted and the quantity of hot metal capacity suspended reached a record for the Mysteel survey of 140Mtpa on 23 October, exceeding the peak in July of 137Mtpa (Figure 4). Curtailments are important as they cut demand for iron ore. But we note the comments of a steelmaker in eastern China reported by Platts: “Large-sized capacity cuts are unlikely to happen this year. As long as mills still have cash flow to support operations, no one wants to be the first to exit the market”.
…However, supply of iron ore should also tighten over this period. The winter freeze in north China typically halts the output of many domestic mines and concentrators; the Australian cyclone season begins from December interrupting shipping; and the Brazilian rainy season begins in January.
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David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
Curtailments of blast furnaces have mounted and the quantity of hot metal capacity suspended reached a record for the Mysteel survey of 140Mtpa on 23 October, exceeding the peak in July of 137Mtpa (Figure 4). Curtailments are important as they cut demand for iron ore. But we note the comments of a steelmaker in eastern China reported by Platts: “Large-sized capacity cuts are unlikely to happen this year. As long as mills still have cash flow to support operations, no one wants to be the first to exit the market”.
