My AGO shares can sit in the bottom draw for now. I'm certainly not going to sell or trade this insane market madness. I have had a gutfull!
In any case here is another opinion on Fe via Financial Times. quote
"Right here right now the spot markets are in turmoil as Vale dumps cargoes, traders who have been caught long at higher prices cut that trading inventory, and Chinese steel mills sit on their hands and run down inventories. It is estimated that Chinese steel mill inventories are down to 10-15 days, down from an average inventory position of 30-35days. The trading houses are waiting for the knife to stick and the whole situation has turned into a buyers strike.
FMG also disagrees there has been any structural shift in the Chinese iron ore cost curve. The vast bulk of Chinese iron ore remains low fe magnetite, while labour and energy costs continue to rise in mainland China, remembering magnetite is energy intense. Yet, buyer’s strikes end and to me this spot iron ore market is like watching any market where “stop losses” have been triggered. The final forced capitulation selling is always the most spectacular, gets the most attention, yet does actually generate a price bottom.
The trading rubber band in spot iron ore is extremely stretched. To use todays spot prices as permanent will prove incorrect in my opinion, with 60% of the world’s iron ore production loss making at current prices. Yet, as you can see, iron ore equities move almost perfectly in tandem with the daily spot price which suggests spot prices are priced in to iron ore equities.
My personal view is there is going to be a upside bounce back to $120-$130t in spot iron ore over the next six months as both China, Eurozone and US fire further stimulus bullets, Chinese steel mills restock, traders move back into the spot iron ore market and high cost supply shuts down. The potential for a spot price rebound is very high in my view, but of course that’s hard to see at the crescendo of a major correction in the spot price."
other interesting opinion in article. http://ftalphaville.ft.com/blog/2012/08/30/1138051/in-defence-of-the-iron-ore-price-floor-and-fortescue/
AGO Price at posting:
$1.39 Sentiment: Hold Disclosure: Held
