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Iron Ore - General Commentary

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Some industries are never really profitable because competition is to high, take airlines for example, they have lost more money than they have made as an industry.

But, the industry margins operate on a knife edge, the moment supply is cut a little, everyone starts making money, but then they all boost capacity and losses years kick in again.

It’s not great for the share holders in that industry, but in biology we would call it an evolutionary stable system.

Such businesses tend to evolve where no player can gain a competitive advantage, they would require players to have a government enforced monopoly or some sort of cartel to make them consistently profitable.
 
There's an analyst at Panmure Liberum with the very apposite name of Tom Price . Recently he said he sees further short-term downside/ correction risk for ore/steel prices and demand in September and October.

Price rates as “bearish” most of the China signals he watches: the debt-laden property sector; steel industry losses; sustained declines in prices for China’s rebar/HRC (weak demand/ robust supply); higher than seasonal levels of ore inventories; total steel output outpacing finished steel demand; and, ore imports poised to reset the annual record high.

There is “not yet” any upside to iron ore prices, Price said. “After years of price-buoying disruptions, seaborne’s ore mining-majors are finally delivering an unmitigated, record-high, collective flow of ore to their principal customer, China. Problem is, China’s need for ore – and the steel generated from it – is faltering."
 
v
ajw01 said:
I can't see anything changing until China's economy starts to get back on track
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There are a few commentators around who suggest that China will never get back on Track.
Its structural weaknesses, its imploding demographics, and its tightly controlled society are all impediments to its return to a booming economic powerhouse.
Although I certainly agree that china has its problems, I have no opinion either way.
Mick
 
ajw01 said:
I can't see anything changing until China's economy starts to get back on track
Click to expand...
Some where around this level for Iron Ore is the natural price, the Iron ore price is affect by both supply and demand, if demand drops so will price, but the price drop causes supply to drop. "Back on Track" is basically around where we are now, I would consider Iron ore fluctuating between $80 and $110 as perfectly normal and healthy, any thing above $110 is just temporary mana from heaven, that lines our pockets for a little while.

So much steel/Iron ore is consumed everyday to to keep the economy steady, it doesn't take a boom to stabilise prices, it just takes business as usual, and the time for invisible hand of supply and demand to work its magic.
 
mullokintyre said:
A disconnect between Iron Ore supplies in China and the inventory of stockpiles persists.
There may be a number of potential reasons for this, none of them great.
Mick
View attachment 184033
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Really, stock piles in Jan 2022 were slightly higher than the are now, but the pricing was roughly the same.

you can go crossed eyed trying to make assumptions of outlook by looking at price and stock pile charts, what I have learn from 10 years following FMG and the steel industry closely is that any guesses you try and make based on the things you are looking at are going to be wrong.

if you take a look at the macro business site, and read all of David's stuff from the past 10 years, you will see he is perpetually wrong, be careful not to fall into his trap.
 
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