Daily iron ore price update (seasonal smash)

Iron ore prices for September 16, 2020:

Seasonal weakness is upon us. We could easily fall to $100 over the next month or so. BTFD for a new year bounce if it fits your horizons.

Chinese empty apartments are fine:

There’s more where that came from as China drives into a new credit cycle:

But Brazil is going to return volumes before too much longer:

Vale is talking it up:

Brazilian miner Vale SA VALE3.SA said on Wednesday it expects to reach an iron ore capacity of 400 million tons per year by increasing output across its operations, including the state of Minas Gerais, the location of a deadly dam disaster in 2019.

The company, however, did not give a date for when it expected to reach this production level, explaining only from which operations it expected the output gains to come.

Vale said it is currently producing at a 318 million tonnes per year rate. In the full year before the dam disaster in January 2019, Vale produced 385 million tonnes of the steel-making raw material.

The company said it could reach a 450 million tonne capacity per year “in the future”, again without specifying a date.

Vale has a production target between 310 million and 330 million metric tons for 2020. The company said last week it expects to meet the lower end of this target.

But the fact is it is still struggling to hit its annual target:

But the volumes are coming soon.

In sum, demand is good. Supply is going to ease but slowly. China still needs to restock lots more ore.

We’re into seasonal weakness for a month or more then a renewed bid into year-end. If Vale brings the volumes over this period then the price peaks in H1 and H2 next year may be a little lower than $130. If not, they may well be higher.

Either way, I don’t see a major or trend decline until the Chinese restocking is done mid-next year.

David Llewellyn-Smith
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