China’s stable, robust steel production rate continues to underpin seaborne iron ore’s trade and prices. But 2016’s season is mature now. The reliable Sep-Oct pullback is nigh.
US$60/t=2016’s general ceiling: Seaborne iron ore’s flagship signal still holds close to $60/t (spot 12-Aug at US$61.10/t cfr fines, Nth China; YTD average = $53.24/t vs. MS 2016e $46/t;3Q16-to-date average US$58/t) – the third time in 2016 that spothas been at this level. China’s steel-intensive infra-programs have needed a higher-than-expected steel output rate from its industry,underpinning ore demand, creatingupside risk to 2016 ore price expectations (MS 2H16e, US$40/t; consensus, US$47/t). Our short-term forecast still features a Sep/Oct seasonal pullback as China’s steel demand and production rate abates ahead of winter,undermining ore demand/prices too (Global Metals Playbook:3Q 2016 – Danger zone,28-Jun-16).
The full text of this article is available to MacroBusiness subscribers
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.
