Iron Ore Prices Slide, but Short-Term Support in the Offing

Iron ore prices are sliding as Chinese port inventories have risen to the highest level since September last year. But short-term support could be in the offing with Chinese steel futures gaining in overnight trade.

At time of writing, benchmark 62% fines have fallen 2.3% to $83.79, for a 7.5% fall since it hit a multi-year high at the beginning of February.

65% fines are down 3.2% to $95.40 and 58% fines have slipped marginally by .8% to 68.36%.

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Weather demand issues make for a murky outlook

Further production curbs could be around the corner, potentially softening demand.

Reuters has quoted one Shanghai-based trader as saying, ‘The air pollution situation in many areas in China is not that good. I believe there will be another round of restrictions on production for the steel industry.

Added to the mix is the lack of construction activity in big cities as the National People’s Congress is underway.

Tangshan has indefinitely extended its highest smog alert, leading to cuts in production of 40–70%, or even a total production halt.

Wu’an, another major steelmaking hub, has also stepped up its production curbs.

Here’s a quick look at the forecast for air quality in Tangshan:

Iron Ore

Source: aqicn.org

Iron ore could find support near future

Despite these concerns, China is in the process of rolling out tax cuts to the tune of US$194 billion as well as pumping money into infrastructure.

It will take some time for these measures to filter through.

That being said the more pressing short-term concern is rebar and hot rolled coil futures contracts.

In overnight trade yesterday these are up 1.02% and 1.60% respectively, as per Business Insider.

So today could be better for iron ore prices.

In the mid-term though, and barring any unforeseen events, a slow slide back down to the $60s range could be how it plays out.

Regards,

Lachlann Tierney,
For Money Morning

PS: 10 Aussie Mining Stocks You Should Buy First Thing Tomorrow.


Lachlann Tierney is a writer for Money Morning and has been investing for nearly a decade. With an MSc from the London School of Economics, he brings a sound understanding of global markets to his writing. Lachlann is interested in emerging technologies, energy solutions and helping people invest their money wisely. Recently, he has been working with Phil Anderson and Terence Duffy. They have three publications:

Phil Anderson’s Time Trader
Cycles, Trends & Forecasts
Money Morning Trader


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