Spot down. Paper fell late yesterday and was stable overnight. Steel heading into super cycle territory. Coal still warm. CISA output to early February is tracking below 2014 which totaled 810mt so we’re roughly on track to repeat last year’s 808mt (though official data has been stronger).
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As said many times, we really can’t expect to see any significant correction in iron ore prices until steel rolls over and right now it is powering towards super cycle prices. Credit Suisse looks at the steel inventory cycle:
We reckon the China steel restock (through the entire end user chain) cycle started in August of 2016. In terms of aggregate 12 month cumulative restock, China’s steel restocking has only just turned positive following a destocking cycle that commenced at end 2014. If this is like any steel restock following earlier destock events, the restock can probably run to the end of CY17.
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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.
