Today’s price update for the iron ore complex shows pricing slipping further as the fake NY rally rolls over:

The longer term futures and swaps are all rolling over aggressively as another Chinese casino market fades away. It has to be remembered that Chinese iron ore prices are not set in the short term by supply and demand, but the twin fairies of sentiment and government fenagling.

More from MetalMiner:

Iron ore has been up some 30% since its lows in December. On the Dalian exchange, the May contract is the most active iron ore futures contract.

Since then, the price has oscillated wildly but the trend is definitely down in recent days. So, why would that be? What drove the price up this quarter and what, now, is happening to make it fall back?

First, after years of talk and several false starts, Beijing finally seems to be trying to grapple with overproduction in the steel industry. The government has pinned its colors to the mast saying it will bring production capacity down by 12% and, as a result, is preparing for the loss of about 500,000 jobs over the course of the next few years. The market has taken that as a sign that supply will be more restricted and mills will be able to command higher prices.

At the same time Beijing has announced it will provide fiscal stimulus to ensure GDP growth remains around 6.5% over the next five years. The market has taken that to mean investment in infrastructure may increase this year.

Finally, believe it or not the most significant fundamental development to impact current supply and demand is a flower show.

The Tangshan Flower Show in steel-producing Hebei province will fall between May and October this year. Steel mills have been asked to halt production between April and October in order to allow a pollution-free environment.

So, to compensate for the lost production rising from a temporary closure of the steel mills, the city has urged steel producers to ramp-up production over next two months. As marginal domestic iron ore producers closed last year, the market has become more dependent on imports, limiting supply options in the short term and making the price more sensitive to short-term demand surges.

As a result of these three developments, some driving sentiment and some driving physical short-term buying, prices for both iron ore and coking coal have risen on the Dalian exchange.

The question is, will it last? The answer is no. In fact, prices have already begun to come off, down 2-3% in recent days as both steel prices and raw materials have responded to the flat demand landscape and the realization that the market for finished steel is well supplied with substantial inventory.

And there it is – and locally, the pundits are smelling the wrong flowers calling this rally a new bottom. It ain’t.

Daily iron ore price update (flowery)