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The Ore Score: Triple Digits Iron Ore Futures Prices are the New Normal

May 28, 2019

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  • Iron ore has been strong all year with in an environment of supply disruptions and record steel production in China
  • For the last 2 weeks, iron ore has gained almost every day and is now firmly above $100 in some markets
  • Iron ore futures in Singapore are comfortably above $100, as the chart below shows

Singapore Iron Ore 62% Futures Price - 1 Year

singapore iron ore

Source: Bloomberg

 

  • Iron ore in China, Qingdao, has been flirting with $100 over the last week 
  • Iron ore futures in Dalian closed at the highest level in over 5 years, the ninth straight day of gains
  • Iron ore has been on a tear in 2019 with a large chunk of production off-line at Brazil’s Vale (VALE) in the wake of a horrific mine disaster that killed over 250 people
  • The supply crunch comes at a time China is producing near-record steel volumes, consuming enormous volumes of iron ore
  • Vale will see its production remain off-line for an extended period of time, making iron ore stockpiles at Chinese ports an extremely important and closely-watched data point these days
  • Yesterday, stockpiles at Chinese ports fell again, falling 3% as domestic steel producers, still producing record volumes of steel, draw down those stockpiles with recent limited imports of iron ore, see chart below

 

Steelhome China Iron Ore Total Ports Inventory - 1 Year

china ports stockpiles

Source: Bloomberg

 

  • Vale is facing another potential dam collapse, though it is at an inactive mine and will not affect production levels if it collapses
  • In a note to clients, Morgan Stanley said it sees iron ore approaching peak level, with a lower price expected in the second half of 2019
  • Morgan expects "extreme market tightness" to east somewhat as 2019 progresses

 

 

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