More here from the Macquarie warning on iron ore:
Iron ore prices have continued to move higher this week, with speculation about more stimulus in China helping to lift prices to two-month highs near $59/t. While we have written previously on our confidence in $50/t price support for iron ore holding through 2017 (see here), we are sceptical as to any fundamental support for the recent move, given abundant iron ore supply, high port inventories and flat to lower steel production. Mysteel data for 45 ports shows iron ore inventory rising to 106.6mt at the end of last week, up 8mt in less than a month, and the highest level since December 2014. Additionally Port Hedland data shows record shipments in June, which means there is more iron ore supply on its way to China. We had written previously that we are already seeing some higher cost supply disappearing since prices dropped from April’s highs, and the Indian monsoon season will cause another 2mt per month of supply to be absent until September, but even despite this seaborne iron ore supply is clearly still plentiful to meet demand.
In May China’s crude steel production was 830mt according to the NBS, down from 845mt in April, and on a daily basis it declined by 1.7% MoM, which is in line with our most recent steel survey result. According to Mysteel data, by the end of last week only 69% of their surveyed 163 steel mills were marking a profit, down from 86% peak at the start of May, but steel output has fallen only slightly with total blast furnace utilisation at the surveyed mills being 79% in recent weeks against a peak above 81% in late May as more mills have undertaken maintenance. In line with usual seasonality, we expect steel output to moderate slightly through the middle of the year.
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