Iron ore’s latest rally comes despite improved supply picture

Iron ore, the “red dirt” that is the key ingredient for the manufacture of steel, is attracting significant interest again, both internationally and within China. Its price has just seen one of its sharpest ever rallies, almost doubling in value over seven months to hit $126.35/mt on July 3, responding to a confluence of supply and demand-side factors. While the price seems to have subsided in recent days, the intensity of the jump has surprised many, who say that the market has effectively disconnected from its fundamentals. A deeper look at the market’s current key drivers may provide some answers. G At a macro level, there have been several factors impacting the supply of iron ore this year, most notably ongoing ramifications of reduced output from Brazil following the Vale dam disaster, coupled with residue impact from Cyclone Veronica hitting Australian production. Against this backdrop, demand from Chinese steel manufacturers remains robust. While long-term term contracts are being fulfilled, the price of marginal iron ore traded on the spot physical markets has increased, reflecting tight supply and strong demand. Bright spots on supply side Buyers point to the fact that Brazil’s Vale restarted operations at its Brucutu mine in late… continue reading

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Source: CTRM Center

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