Texture from Reuters:
Investors are cautious as prospects of China’s economy remain uncertain, a Shanghai-based trader said. Demand can be maintained at the current level but is unlikely to grow further, said the trader, adding that supply of iron ore is relatively sufficient now.
The question is not underlying demand. It is weak. The question is apparent demand and how far Chinese steel mills drive any post-Vale accident restocking pulse. This picture is quite murky given it has disrupted typical seasonal patterns.
We’re still in September when prices would normally get caned but that has been disrupted so far by inventory builds. It could go on, or reverse. It is unclear.
What is clear is that as those distortions are flushed through, this market is primed to go a lot lower over a six month time frame.
To the charts:
Spot flogged. Paper is even weaker. Steel breaking. Doesn’t look great short term.
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.
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