Dalian iron ore still marching higher:
Steel mills have been operating at low inventory levels and only purchasing hand-to-mouth from ports due to high raw material prices.
Market estimated that average iron ore stocks at mills have fallen to around 20 days of use, down from normal inventory levels of 30 days. Ore stocks at some private mills in top steelmaking province Hebei have dropped to only 10 days, according to two purchase managers at steel mills in Hebei.
“With strong profitability, mills will still need to buy expensive raw materials to maintain full-load operation,” said a Hebei-based trader.
Meanwhile, investors also fretted about further supply disruption from Brazil, China’s second largest iron ore source, after its biggest iron ore miner Vale SA warned of the risk of another tailings dam rupture and suspended a rail freight line.
That’s getting awfully low. Mill inventories have the single greatest correlation with spot prices. If mills restock in a scarcity panic, prices could spike $20-30 easy peasy.
And remember, right now is one of the seasonally weakest periods on the calendar.
Brucutu is still key so it could end any minute but right now this market is primed to shock upwards. Nothing runs like iron ore once the cat is out the bag.