Daily iron ore price update (coal smash)

Sunday 11 September 2016

Iron ore prices for September 9, 2016:

Tianjin benchmark rose 0.2% to $57.50. Paper was up overnight (for no obvious reason). Steel flat. Chinese port stocks down another 700k last week and it looks like the peak is in. If it keeps destocking at this pace it removes 70mt tonnes per annum effective demand versus when it was climbing.

With coking coal now reaching prices not seen since 2012, the risk to iron ore prices is growing just as exponentially. Coking coal is now absorbing almost as much input cost as iron ore for every tonne of steel so mill profitability is sinking:

This is a red rag to the iron ore destocking bull as mills seek to recover lost margins.

Brace for lower prices.

About the author

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.