Iron ore’s rapid retreat in recent weeks shows once again that price pullbacks can be as disorderly as the exuberance of rallies, before the fundamentals of supply and demand reassert themselves.
Depending on which price for the steel-making ingredient is used, the price has slumped between 32.1% and 44% since the all-time high reached on May 12 of this year.
But a 51% leap in the spot price of iron ore for delivery to north China, as assessed by commodity price reporting agency Argus, in a mere seven weeks from March 23 to a record high of $235.55 a tonne on May 12 was always going to be far frothier than market fundamentals justified.
The speed of the subsequent 44% tumble to a recent low of $131.80 a tonne in the spot price is also probably not justified by the fundamentals, even if the trend toward lower prices is entirely reasonable.
Supply from Australia has been steady as the impact of earlier weather-related disruptions faded, while Brazil’s shipments are starting to trend higher as the country’s output recovers from the effects of the coronavirus pandemic.
Australia is on track to ship 74.04 million tonnes in August, according to data from commodity analysts Kpler, up from 72.48 million in July, but below a six-month high of 78.53 million in June.
Brazil is forecast to export 30.70 million tonnes in August, up from 30.43 million in July and in line with June’s 30.72 million, according to Kpler.
It’s worth noting that Brazil’s exports have recovered from earlier this year, when they were below 30 million tonnes every month from January to May.
The improving supply picture is being reflected in China’s import numbers, with Kpler expecting 113.94 million tonnes to arrive in August, which would be a record high, eclipsing the 112.65 million reported by China customs in July last year.
Refinitiv is even more bullish on China’s imports for August, estimating that 115.98 million tonnes will arrive in the month, a 31% surge from the official figure of 88.51 million for July.
The figures compiled by consultants such as Kpler and Refinitiv don’t exactly align with customs data, given differences in when cargoes are assessed as having been discharged and cleared by customs, but the discrepancies tend to be small.
Source : https://www.hellenicshippingnews.com/iron-ore-slump-justified-by-improving-supply-china-steel-control/