Daily iron ore price update (ferrous complex deflation)

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Spot down. DCE paper fell further again last night but managed to rebound. Coking coal futures were smashed. Thermal spot too. Steel has rolled. We’re into full ferrous complex deflation now.

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As said yesterday, throughout the Q1 blow-off, markets and media under-estimated how important temporary factors were in the price jump. The two most important were the Chinese restocking and weather-created distortions in the Pilbara, both of which are now passing.

Over Q1, Chinese ports added 15mt of iron ore inventory. That is an annualised rate of 60mt. As noted earlier today, that process has likely run its course. If port stocks now destock at the same rate then the reversal in demand from Q1 to Q2 is -120mt annualised of iron ore. That is a lot.

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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.