Iron ore goes splat


Back from holiday and the much anticipated new boom in steel output is caput:

The benchmark March iron ore SZZFH4 on the Singapore Exchange slid 2.91% to $127.45 a ton, as of 0706 GMT, in part due to fading bets of early U.S. rate cuts amid stronger-than-expected U.S. producer prices in January.

The weakness in the Singapore benchmark came after it had climbed by over 3% over the holiday break when Chinese bourses were closed.

“Such a steep price fall is out of my expectation as we thought prices would consolidate today; the sharp drops in the coal market might have given a blow to market confidence, dragging down ore prices as well,” said Cheng Peng at Sinosteel Futures.

Iron ore inventory at major Chinese ports surveyed rose 4% during the holiday break to 136.76 million tons as of Feb. 18, while profitability among mills surveyed slid to 25.54%, the lowest since mid-November, data from consultancy Mysteel showed.

Rebar futures were soft:

Likewise fell out of bed for both iron ore and coking coal:


Weak demand, steel ruined margins and rising inventories of inputs. Yuck!

It’s probably still too early to expect a significant price drop, but when seasonal tailwinds turn headwinds in Q2, such a mix will be toxic.

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.