Iron ore blows off

I have seen some mad markets in my day, and this is one for the pool room. Iron ore is blowing off into the Chinese super bust.

Dalian iron ore futures are up 40% in three months. Friday night’s spike was in sympathy with oil:

Yet, there is no turn in steel demand:

Nor supply. Goldman:

Iron ore micro pressures starting to build. While iron ore has participated in the broad metals rally over the past week, it is significant that key micro indicators have started to offer some evidence of a softening turn, in line with our surplus path expectation…we would note that weekly China steel production moved into y/y contraction this past week (-3% y/y) for the first time since early July and, on current trends, is set for an extended multi-month phase of y/y contraction. Onshore steel production has averaged 9.3Mtw over the past month, which we would argue has sequential downside risk from the probable impact of policy cuts ahead. That compares to an 9.7Mtw average over the course of September/October last year. Third, China’s weekly domestic steel demand data remained in clear contraction through August, falling ~4% y/y during the month, and is now down just over 4% y/y for the year-to-date. The ongoing sharp contraction in China’s new starts trend remains the key weight on domestic steel demand. With further pressures on steel exports expected given ex-China demand headwinds, we also see that as a restraining factor on domestic steel production and, in turn, iron ore demand. In this context, we expect iron ore prices to come under more downside pressure ahead…

Steel is piling up and iron ore stocks have turned higher as well:

Looks ripe.