The ferrous complex was weak on October 19, 2022:
It’s a grind rather than a crash for now but we’re going lower led by SHFE and DCE futures:
It remains my view that both will challenge support levels in the near future.
The newsflow for the iron ore supply side is MOAR. We’ve got temporary disruptions from Kumba and Ferrexpo but the majors are gushing ore:
On Tuesday, Vale reported a 1.1% increase in quarterly iron ore production, while Rio Tinto posted a 4% rise in shipments in the last quarter compared with the previous three months.
“Negative margins and weaker demand prospects are discouraging steel mills to increase production. On the other hand, the supply side has been strong,” ANZ commodities strategists said in a note.
“With global recession risks and China’s slowdown due to its zero-covid policy and property sector downturn, many steel mills have stopped production in advance for winter repairs”, analysts at Huatai Futures said in a note.
RIO is missing targets but BHP and Vale in particular are vomiting ore:
• Iron ore production increased 21% q/q to 89.7 Mt, reflecting the dry season in the Northern System and higher third-party ore purchases and production in the Southern System.
• Sales of iron ore fines and pellets increased 6.0% q/q to 77.6 Mt. The usual production-to-sales gap in Q3 resulted from transiting inventories across the supply chain, which Vale expects to revert in the next quarter, depending on market conditions.
In short, more is coming to market as demand falls away.
It ain’t rocket surgery.
