Daily iron ore price update (yawn rally)

The ferrous complex popped on November 11, 2021 with spot and steel but paper flamed out overnight:

The market is trying to get excited by yesterday’s wave of policy rumours. But, the truth is, they are policy calibration not a swing to broad stimulus so the downside case for Chinese construction is intact if marginally mitigated, and the bearish case for iron ore undisturbed.

So long as the thermal coal price keeps falling and Chinese power markets normalise, the steel glut remains enormous with the return of suspended EAF output. The resulting steel raw materials adjustment is beyond enormous and requires a much lower price to shake out supply. For iron ore that price is below $60. For coking coal it is below $100.

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About the author

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. 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.