Iron Ore Falls to March Lows

It truly is collapsing, but I didn’t want to give any of you heart attacks before tomorrow’s trade. It might prevent some of you from liquidating your portfolios and causing an even greater decline.

Iron ore represents China in all of its grave depravity. Now we have the price dropping to the lowest point since March the 3rd, at the same time copper keeps dropping too. There is a discernible cause for panic amongst China bulls. By extension, all of you should panic too.

“There’s little doubt that the iron ore price will sink below $50 a ton as seaborne supply is rising while the Chinese steel mills will reduce purchases,” Ren Jiaojiao, an analyst at Maike Futures Co., said by phone from Xi’an on Tuesday. Inventories at China’s ports — which topped 100 million tons last week — may increase further, according to Ren.

“The run-up in April was fueled partly by purchases from steel mills ramping up production to capture the exceptionally-high profit margin,” said Ren. But that margin is now “quickly contracting, so mills are adjusting to the new situation by depleting their raw material inventories first. They will also adopt a hand-to-mouth strategy in purchases later because of anticipation of higher supply at the ports.”

Ore with 62 percent content sank 6.7 percent to $51.22 a dry metric ton on Monday, the lowest since March 3, according to Metal Bulletin Ltd. After surging 23 percent last month as China’s ill-fated frenzy gathered pace, the price has tumbled by the same amount so far in May. Futures in Dalian fell as much as 2.6 percent on Tuesday, while the SGX AsiaClear contract was little changed.

Citigroup Inc. said in a report on Tuesday it remained bearish on iron ore, forecasting persistent oversupply on rising output from the top miners as well as Gina Rinehart’s Roy Hill project. At the same time, weaker steel prices will encourage mills to restrain output and keep ore holdings low, it said.

“Oversupply should extend into the rest of 2016,” Citigroup said, predicting that prices will average $47 a ton this year. “Weaker steel prices should incentivize mills to decrease utilization rates and maintain low iron ore inventories, putting pressures on Chinese iron ore imports.

Talking about iron ore and how doom is beckoning gets boring sfter a while. Not before long, the cat calls shrieking from this bloggery must be backed up with actual calamity. Don’t worry lads, recession is an assured outcome. Give it a chance. You might like it.