Commodities

34

“Keep taking the pills, Nev”

Fresh and cross-posted  from FT Alphaville, comes this unusually frank assessment of Fortescue and iron ore. Remember the joke about the $120 iron ore price floor? How we laughed. And for continued amusement here’s Nev Power, chief executive of Fortescue Metals,the highly-leveraged poster child of the Australian resources boom, discussing iron ore at Wednesday’s annual results announcement. From

7

And now for coking coal…

I have been a bit confused by some of the spot versus contract pricing going in the market for coking coal. It appears I got my quarters mixed up. From ANZ today, there’s clarity, sadly: Newcastle Sept coal futures fell mildly to USD91.5/t. China’s total coal imports fell 10.3% m/m to 20.2mt in July, but is still

11

Iron ore crash goes on

Ore got walloped and swaps got monstered again yesterday: Here’s the latest on market internals from Reuters: Shanghai steel futures hit a record low on Wednesday, exerting more pressure on prices of the raw material iron ore whose freefall has forced Chinese steel producers to skip contracted cargoes. Chinese mills, the world’s biggest iron ore

76

End of an era for iron ore?

The world steel association released its July production report overnight and the news is not especially good: World crude steel production for the 62 countries reporting to the World Steel Association (worldsteel) was 130 million tonnes (Mt) in July 2012, an increase of 2.0% compared to July 2011. China’s crude steel production for July 2012

9

Ore swaps bust the ton

Iron ore weakness continued yesterday: 12m swaps busted the ton. Here’s a long term chart: Sorry to harp on this, but swaps are rapidly approaching the 2010 low of $98.50 that marks the neckline on the giant post-GFC head and shoulders pattern. The news from China was also poor. From Reuters: An unexpected rebound in

11

Yancoal cuts expansion plans

From the SMH: The chief executive of Yancoal Australia says coal prices are falling faster than miners can keep up, as the China-backed coalminer said it would halt expansion and seek broad cost cuts. Yancoal chief Murray Bailey told analysts today that the economy of Australia’s largest export market, China, had slowed markedly in relation

20

Terms of trade shock developing

By David Llewellyn-Smith I know that at the moment it’s much more fashionable to celebrate the bubble in the Australian dollar than it is to point to weakening fundamentals, but the fact is our terms of trade are falling fast. The prime culprit remains iron ore, which late last week broke down again: And the

4

Is the food spike finally hitting China?

Courtesy of Sober Look: China’s Ministry of Commerce blamed the increase in vegetable prices on “strong winds and rainfall in the country’s eastern regions” that “disrupted production and logistics.” Nevertheless vegetable prices are up 15.4% over the past four weeks. China Daily: – The wholesale prices of 18 types of vegetables in 36 cities rose

7

Crude now at Euro record

Courtesy of Sober Look: Brent crude oil priced in euros hit a new high today of €94.83/barrel, exceeding the highs reached in 08 as well as early this year. Source: Bloomberg This rally has been driven by four factors: 1. The euro is down close to 15% over the past year. 2. Draghi’s “Believe me,

31

Ken Henry’s RSPT haiku

Yesterday former Treasury Secretary Ken Henry appeared in the below ANU video at the AFR in which he complained about the state of public policy debate (no arguments there), celebrated the fiscal response to the GFC (no argument there, either, beyond the FHOG, which wasn’t Treasury’s idea), mentioned in passing the challenge of the Australian

1

Ore melt goes on

After a few days of stability, the ore price slid again yesterday: And the charts: And Chinese steel prices: The recovery in Chinese bulk shipping indexes remains plateaued:

27

Ore breaks lower

The ore price fell again yesterday: And as the chart shows, we are now well clear of the neckline on the head shoulder break, which now looks like upside resistance: For those that don’t think that this pattern is text book then this week’s RBA chart pack may convince: Notice the left hand chart with

14

Rio pins its hopes on unconfirmed Chinese stimulus

There are some hopes that Chinese stimulus will work wonders.  Rio Tinto, for instance, believes that the stimulus will support demand for their iron ore.  Chief executive Tom Albanese said in today’searnings announcement: Although sentiment remains negative in Europe and the US recovery is still fragile, our order books are full and we expect Chinese GDP growth

16

Diggers and Dealers downbeat?

Sounds like the annual Diggers and Dealers mining pow wow is a little more downbeat this year. From the AFR comes this quote from Neville Power, CEO of Fortescue: “We have not seen anything like the tight labour supply that was forecast,” he told media following a presentation at the Diggers & Dealers conference in Kalgoorlie.

3

Ore bounces along the bottom

Iron ore remains impressively weak. In the past, when the price has fallen swiftly it has to rebound just as quickly. There is no sign of that so far in this round of weakness. Here’s yesterday’s prices: And charts: Chinese steel is still falling: And the coastal bulk shipping rallies have stalled for now: There is

3

Coking coal crunched again

Friday saw a little more downward pressure on the iron ore price but coking coal was smacked for another 5% last week: Newc spot bounced last week adding 3.5% to USD85.65/t, while coking coal continued its decline falling 5.5% to USD182.27/t. Although prices at the premium end of the thermal coal spectrum gained ground, a succession of utility tender

2

Macro Investor: Mining services whimpers

By Chris Becker Over the weekend, reports continued to emerge following BHP-Billiton’s (BHP) announcement of a large impairment charge on its US shale gas assets on Friday, that expansion plans in the Pilbara will be put on the backburner. CBA analysts first reacted by cutting earnings forecasts at BHP – but this already looked priced

3

Dead cat borence?

The bounce in iron ore looks weak. Rather like a dead cat. Here’s yesterday’s moves: And the charts. No change to steel prices: But 12m iron swaps reversed substantially: Maybe a test of the low or straight through? The rally in China’s bulk shipping indexes is slowing too: The rally could be more short lived

2

RBA commodity price index falls

The RBA commodity price index for July is out and shows a 2.4% fall for July: Preliminary estimates for July indicate that the index rose by 1.3 per cent (on a monthly average basis) in SDR terms, after rising by 0.3 per cent in June (revised). The largest contributors to the rise in July were

1

ANZ cuts commodity price forecasts

Find below ANZ’s new commodity price forecasts, which include material downgrades to the iron ore complex. The ANZ team is excellent. Still, I can’t help feeling that an average price of $140 early next year is pretty bullish. ANZ Commodity Insight – Price Revision

10

Ore bounces

My call for a short term bounce in iron ore is firming up. Overnight we saw positive moves across the complex: And to the charts. For steel: As well as ore itself: Looks like the head and shoulders pattern may miss, which is good news to say the least. Nonetheless, I would caution against hopes

22

Ore breaks the neckline

Here’s your daily update ore prices. Not a lot of action yesterday but prices still fell on the spot market. In fact, they took out last year’s October low and the neckline on our scary head and shoulders pattern: The break is minor and may be bear trap but even so not encouraging. Neither is