Bloomberg article part thereof
not much to excite...sell into strength and short covering I feel...
This week's sell-off, which formed part of a broad retreat in commodities that will also hurt the budget, followed losses in futures, with the SGX AsiaClear contract in Singapore 12 per cent lower this week, the most since November.
"The market is still oversupplied to the tune of 7 per cent and growing," Richard Knights, a London-based analyst at Liberum Capital Ltd., said by email.
"Only much lower prices will shake out excess capacity. I expect $40s in the second half and possibly $30s."
While iron ore benefited last year after Chinese policy makers buttressed growth and the property sector improved, conditions have shifted in 2017 even as mine supplies have gone on expanding. Financial markets in Asia's top economy are now feeling the strain of tighter liquidity, with the onshore benchmark money-market rate rising to the most expensive in two years. Steel futures have also been hit, with reinforcement bar and coil dropping.
'Very Bearish'
Rising rates are "signaling a switch to a tightening by the PBOC, which is bad news for steel demand, particularly from real estate," said Serafino Capoferri, London-based senior consultant at CRU Group, referring to the People's Bank of China.
Only much lower prices will shake out excess capacity. I expect $40s in the second half and possibly $30s
Liberum Capital's Richard Knights
"We are very bearish and always have been through the cycle. I don't think $60 is enough to encourage the supply exits we need in the market."
On the Shanghai Futures Exchange, rebar lost 5.9 per cent this week, paring gains in 2017 to less than 3 per cent, while hot-rolled coil tumbled 8.3 per cent, the biggest weekly fall since November. Iron ore on the Dalian Commodity Exchange dropped 11 per cent this week.
Iron ore's retreat has come after analysts, some miners and Australia highlighted prospects for weakness. The Australian government flagged rising production in its latest outlook, and forecast prices will drop back into the $50s this year. Last week, BHP Billiton Ltd. warned of pressure as a "significant amount" of supply from Australia and Brazil was set to hit the market.
There was another signal of robust supply this week. Exports from Port Hedland -- which handles cargoes for miners including BHP and new entrant Roy Hill Holdings Pty -- climbed to 42.3 million tons in April, the third-highest figure ever. Year-to-date shipments are 6.6 per cent more than in 2016.
The rise in shipments in recent months, as well as record steel production in China, has helped to boost stockpiles at ports in China. After peaking at a record 132.5 million tons in March, the holdings have held near that level, according to Shanghai Steelhome E-Commerce Co.
Miners' shares have been dealt a blow. In Sydney, Fortescue Metals Group Ltd. dropped for the 10th week in 11. BHP -- which is facing a fresh set of activist demands to overhaul -- posted a fourth weekly decline, the longest losing streak since late 2015, and Rio Tinto Group is down 5.4 per cent since the close last Friday. In Brazil, Vale has lost almost 7 per cent this week.
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