Supply and demand
Year-to-date, iron ore prices have fallen ~38%. This is mainly because of increased supply from the four major iron ore companies and weaker-than-expected demand from China. We’ll discuss the reasons for these trends in later parts of this series.
Iron ore industry and key indicators to watch out for
A number of factors impact the prices of iron ore including demand and supply, growth, and the development stage of world economies.
Of all the world economies, China consumes the most iron ore and is responsible for about 60% of seaborne iron ore imports. Since China is the single most important market as far as demand dynamics are concerned, factors related to this economy affect the iron ore industry most significantly.
To learn more, read Must-know: Iron ore use and stage of development.
Supply side
Rio Tinto (RIO), BHP Billiton Limited (BHP), Fortescue Metals Group from Australia, and Vale SA (VALE) from Brazil, significantly impact the supply side of the equation for iron ore. Combined, these companies contribute more than 70% of seaborne iron ore supplies.
Indicators
In this series, we’ll discuss various demand and supply indicators you can track to get a sense of where the iron ore industry’s performance is headed.
On the supply side, we’ll talk about production and future supply plans for the major companies.
On the demand side, we’ll look at factors like China’s inventory levels, steel production, iron ore imports, and PMI (or purchasing managers’ index).
In a broader context, we’ll talk about factors such as the credit situation and the real estate market. We’ll look at the fall-out of these on demand and supply for steel and ultimately, iron ore.
Lastly, we’ll look at iron ore futures and see how movement aligns with the current industry dynamics.
Most of these indicators are published monthly, while some others are reported weekly or quarterly. But it’s important to look at indicators collectively because they give cues about the direction of iron ore prices. Ultimately, they’ll also tell you about the share prices of companies including Rio Tinto, BHP, Vale, and Cliffs Natural Resources Inc. (CLF), and the SPDR S&P Metals and Mining ETF (XME).
Source: market realist
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