Daily iron ore price update (rational or irrational?)

Spot prices to the moon. Paper stalled. Steel fell. The charts:

To me this is now quite irrational. There’s enough iron ore that can come on at this price to sink it to zero. The only question is this, from Reuters:

Iron ore miner Vale SA’s chief financial officer and its former chief executive should be indicted for manslaughter, a Brazilian Senate committee probing a deadly dam collapse recommended on Tuesday.

The committee is also seeking the indictment of Vale itself as a company, as well as dam stability auditor TÜV SÜD, for environmental damages and corporate responsibility for actions of their employees in the late-January disaster that killed nearly 250 people.

…Vale shares, which early in the session touched their highest since before the Brumadinho disaster, were down 5.8% in afternoon trading.

The nonbinding recommendations could influence prosecutors in their ongoing probe of Vale and its executives for negligence regarding the disaster.

…One would outlaw all tailings dams for mining and industrial waste. That would go far beyond a ban instituted in February on the specific type of “upstream” dam that ruptured. It would allow for 10 years to decommission the hundreds of existing tailings dams around the country, a costly move for miners.

Barclays analyst Amos Fletcher said he doubted that Congress would follow through on shutting down all types of tailings dams. Such a move would go beyond what is warranted and halt a significant amount of mineral production, which Brazil counts on for a large portion of its GDP, he said.

Basically the market is pricing the worst case outcome for Brazilian supply. That is an asymmetric bet and not rational in my book.

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