Daily iron ore price update (June softness)

Iron ore prices for June 10, 2020:

Some pullback across the board which always happens in June:

Platts does not think it will get far this time:

Rebar inventories have started to build in southern and eastern China as the rainy season slows construction activity, but steel prices are unlikely to fall sharply as the easing of domestic credit conditions mean mills and traders should not need to destock at low prices to raise cash, market sources said June 9-10.

Construction steel inventories in Guangzhou are currently around 30% higher than a year earlier, while rebar inventories in Hangzhou are 116% higher on year, according to local traders.

Hot-rolled coil inventories are also around 65% higher on year in Shanghai and double the usual level at Lecong market in Guangdong province, even though demand from manufacturing was less impacted by seasonal wet weather.

The National Bureau of Statistics’ China manufacturing purchasing managers’ index softened to 50.6 in May from 50.8 points in April, indicating the sector was still showing signs of weakness after lockdowns to contain the spread of the coronavirus in the first quarter.

However amid an easing of credit conditions in China in a bid to shore up business activity, some mills are understood to be offering financing support to smaller traders to help them through the slow season.

“In fact, mills will probably build up their inventories during the quieter period as, compared to traders, their stocks aren’t too high and they are flush with cash at the moment,” a market source in China said.

I tend to agree. Steel inventories are well hidden and playing little role because the mills are operating in part as employment policy firms.

As well, Brazil remains a virus disaster:

The Chines recovery is still garbage:

But credit is flowing and a lot of it is for building more useless crap:

I still see a strong H2 for iron ore.

Houses and Holes
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