Spot on from Macquarie:
Iron ore prices have jumped by more than 18% since Chinese markets returned from their weeklong holiday in the first week of October, rising above $64/t, according to TSI, for the first time since the beginning of May. We believe prices are being swept up in the market euphoria driving all commodities higher in the last few weeks in China, as domestic investors chase commodities on concerns around inflation and RMB depreciation. Indeed, in the last week prices for coal, aluminium, zinc and lead have continued to rise on Chinese exchanges, all hitting highs in RMB terms not seen since 2012.
In August we raised our seaborne supply forecast for 2016 by 50mt, with 43mt of this coming from outside the major suppliers, as iron ore supply globally has proven itself to be highly price elastic. The longer prices stay above $60/t, the more supply we expect to see coming into the market within a short time frame, especially from India and Chinese domestic mines.
