Daily iron ore price update (headfake) | Macrobusiness

By Houses and Holes
at 12:05 am on June 28, 2017
Reproduced with permission of Macrobusiness.

Iron ore price charts for June 27, 2017:


Tianjin benchmark roared 6% to $59.10. Coal is calm. Steel too.

The trigger of course was this, via SCMP:

China would like foreign businesses to keep their profits in the country and reinvest them, Premier Li Keqiang said in his keynote speech at the World Economic Forum in Dalian on Tuesday, although he added there would be no restrictions on the movement of their money.

Economy

China’s economic growth is gaining fresh momentum and there will be no hard landing in the world’s second-biggest economy. The unemployment rate in May dropped to 4.91 per cent, he noted, the lowest level in many years.

Market access

China will continue to open its markets in the services and manufacturing sectors. It will loosen restrictions on shareholdings by foreign companies in joint ventures and will ensure China will continue to be the most attractive investment destination.

Economic policy

The Chinese government will not rely on stimulus to bolster economic growth. Instead, it will use structural adjustment and innovation to maintain economic vitality. The government will keep stable macro policies – a prudent monetary policy and a proactive fiscal policy – to ensure clarity and stability in financial markets.

Financial risks

China is fully capable of containing financial market risks and avoiding systemic ones. There are rising geopolitical risks and increasing voices opposing globalisation. China will keep its promises in combating climate change and will work to promote globalisation.

Absolutely nothing new there. In fact it is a little reassuring to those of us that think reform is on the verge of returning.

But the market has been heavily sold and so it got excited. There is a little room for it to run given lowish mill iron ore inventories:

But, in all honesty, I’m stretching to be positive. The price jump will very quickly arrive at Chinese ports as bowel-shakingly higher inventories in short order:

And the economy is still going to slow at the margin as housing comes off leading to a destock in the foreseeable future:

The great thing about markets is they always off[er] second chances. On this occasion it is to get even more short.

4 thoughts on “Daily iron ore price update (headfake) | Macrobusiness

  1. […] to test support between $50 and $52, typical of a bear market. Chinese housing price growth — a key driver of iron ore prices as illustrated last week — is slowing and likely to drag ore prices […]

  2. geoff farnell says:

    agreed – great post – many thanks .

  3. […] ore roared back, breaking resistance at $60. But this is a bear market. Also port inventories are climbing, while housing price growth is slowing. Expect another test of support at $50 is likely. Breach would signal another […]

  4. Kevin Murphy says:

    Great post Colin. I am taking the chnace to get out of what mining stocks i have left. Thanks

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