Commodities

47

Iron ore price assumptions collapse

By David Llewellyn-Smith The iron ore complex tanked again yesterday: Perhaps some hope in the contango with the 12month which did signal the bottom in last year’s crash: But Chinese steel prices are still falling too: Here are some choice iron ore quotes from Reuters: “We believe that China is in the middle of a

7

Pettis: Hard commodity prices will halve in 2 years

Excerpted exclusively from Michael Pettis latest newsletter: For the past two years, as regular readers know, I have been bearish on hard commodities. Prices may have dropped substantially from their peaks during this time, but I don’t think the bear market is over. I think we still have a very long way to go. There

6

All quiet on the iron ore price front

All quiet on the ore front yesterday with little movement anywhere (though swaps haven’t updated yet): As some buying support appears to be coming back into the market, I thought it worth revisiting a chart from Morgan Stanley from last year’s falls: Take a close look at the very sensitive relationship between the iron ore

0

Coking coal still sliding

From the ANZ: Newcastle FOB physical thermal coal prices were steady last week at USD89.05/t. Although market activity remained subdued, the end of the Muslim holiday of Eid al-Fitr in Indonesia should see more movement this week. Having hit a low of a low of USD81-82/t in late July, thermal coal prices have held up well. The same cannot be

2

Credit crunch seizes iron ore price

Friday’s ore price movements showed some stabilisation: With 12 month swaps catching a break, there is some hope that last’s week’s heavy dump was the capitulation phase for the ore price. There is not much hope in the fundamentals, however, with rebar falling to a new low and little discussion so far of Chinese steel-makers

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.