Iron ore is going to crash

Iron ore prices for February 2, 2020:

Everything smashed. Market expectations of a tightening market are being dashed:

• Crushed Chinese steel mill profitability has triggered destocking.
• COVID outbreaks have hit Chinese demand so steel prices are falling as well, meaning more destocking.
• Chinese monetary and fiscal tightening will intensify as the year deepens, especially on the vital property development sector.
• Chinese authorities have crushed paper volumes and are coming after steel output.
• La Nina has so far failed to inhibit supply very much in Australia (or Brazil):

• New supply is popping up all over.
• China’s trade war on Australia seems to have eased as well, in part thanks to the perverse impact on iron ore.

We’re in for a good old fashioned crash here. Expect a rebound after the Chinese New Year when steel mill profits are restored. Then another big crash in May as Chinese slowing develops into market consensus.

Unless Vale butchers its supply ramp up again (via screw-ups or weather) by the time of the seasonal September shakeout we could be back at $70-80.

When iron ore moves, it moves big.