Texture from Bloomberg:
While iron ore’s direct exposure to trade disputes is minimal, “the loss in confidence appears to have led to a rapid reassessment of the iron ore market,” analysts from Capital Economics Ltd., wrote in a note dated Friday. “We think that the price of iron ore will decline further on the back of a renewed slowdown in China’s economy and, more specifically, a downturn in China’s construction sector.
On Tuesday, Fortescue Metals Group Ltd warned there’s potential for mainland demand to soften this half compared with the first six months.
…’Supply-and-demand drivers have been tilting to a bearish stance for weeks now the fall was in the making and we only needed a trigger, Marex Spectron Group analyst Hui Heng Tan said, referring to the US-China trade conflict.
‘Mills in China are reportedly reluctant to increase iron ore stockpiles given the weak demand backdrop, Commonwealth Bank of Australia said. ‘Demand concerns reflect the US-China trade tensions, including Washington’s recent designation of Beijing as a currency manipulator, the bank said in a note.
…Roy Hill Holdings Pty is aiming to lift shipments to a run rate of 60mn tons a year, chief executive officer Barry Fitzgerald said.
Dalian iron ore futures slumped to a two-month low on Monday, extending losses to an eighth session, amid worries of slowing demand as China’s top steel-producing province of Hebei looks to tighten emission requirements.
Add the choke in Chinese credit and nobody is bearish enough yet. To the charts:
Spot has not moved in two days leading me to conclude that it has not updated for some reason. Paper went full circle yesterday with a big selloff then bounce on the Heibei news. Then down again overnight.
Production constraints won’t matter now. We’re into a major correction driven by fading demand meets surging supply. For some time I have worried about housing starts following sagging leading indicators and that may well be upon us, via Westpac:
$50-60 by year end in one of the great iron ore crashes is now my base case.
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.