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The Party's Over? Iron Ore Falling on Increased Shipments and Growth Concerns - The Ore Score

Jun 06, 2019

 

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  • Iron ore’s strong run up in 2019 looks to have come to an end, or so it seems
  • There are a number of factors pushing prices lower
    • A revival of shipments of ore from Australia where a cyclone in late March closed some production
    • Growth forecast revised lower for the second half of 2019
    • Worsening sentiment in China, where steel production has been at record levels
  • Analysts agree that the supply dynamics for iron ore are fully priced in, it is the demand situation the will be more in focus and relevant to pricing going forward

Iron Ore Dalian Exchange, China - 9 months

dalian iron ore

Source: Bloomberg

 

  • The abrupt cut in production in Brazil from Vale a few months ago sent prices soaring
  • Vale shuttered 93 million tons of production in a year they expected to produce just over 400 million tons
  • Shipments from major exporters are up 10% in the second quarter according to ship tracking data
  • Near-term prices will be affected by
    • China’s continued stimulus spending-or not, especially on infrastructure as a way to prop up the weakening economy; most analyst expect Beijing to leave the spigot open
    • The potential return to production for some of Vale’s shuttered mines-they will likely be closed for an extended period, however
    • Continued trade tensions could lead to further growth expectation cuts which would in turn pressure the price of iron ore
    • A potential rate cut in US-if a cut materializes growth outlook could improve, a positive for iron ore
       

 

 

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