Hotfire,Cheers for clearing that up.I generally agree with your...

Hotfire,

Cheers for clearing that up.

I generally agree with your sentiments. At least in the short term there is no denying the downward pressure on the sector and we all know about bottom picking.

When small movements in FX and FE price have such a massive impact on valuation it certainly makes for a very interesting investment decision. I'm not ignoring the immediate headwinds but my long term view is that the FE price will average well above AGO's cost of production and that there is also room for $A to fall when the US eventually raises it's interest rates.

AGO is also coping a bashing about its "failure to negotiate a rail solution". To me this has been blown at of proportion. They have implied that this will likely follow the release of the corunna/mcphee feasibility study which will dictate what can be negotiated with potential investors. It would be in AGO's interest to release the results at a point when there is not so much negativity in the sector and they certainly aren't going to be rushed into it just to appease the short term views of annalists.

The issue with the increasing port inventory is an interesting one to me. There was a lot of concern in regards to the PBC's changes in lending/financing ratio's on ore inventory, and it seems this has had a large impact on demand for now. It would be very interesting to know what percentage of these stock piles are held by traders as opposed to the steel producers themselves.(I couldn't find data on this, anyone got information?) If the Steel Mills are running down their inventory at the moment then if would be expected that they would need to return to market sooner or later, especially if there is any further stimulus.

The MB link you provided mentions that China is still producing steel at record levels and at these prices their local miners are hurting big time “Meanwhile, China’s domestic iron ore sector is now being savaged by lower-cost, abundant imports.” How long this can be sustained is any ones guess, but over the longer term surely the higher cost lower quality producers would close leaving the supply gap to be filled by imports.

Lets hope the recovery is near.

Yeatesy.