The list of asset prices that have completely reversed their post-election gains continues to expand. Last week, iron ore officially joined that list…and the sell-off continues apace. On Tuesday night, April 18th, Business Insider reported:
“According to Metal Bulletin, the spot price for benchmark 62% fines fell 4.6% to $63.20 a dry tonne, extending its losses from the multi-year high of $94.86 a tonne struck on February 21 to 33.4%.
It now sits at the lowest level since October 27 last year.”
It was exactly in late October when iron ore broke out to a fresh multi-month high that led to a (very choppy) rally that did not end until February’s multi-year peak. The drop in April alone has been dramatic…
The on-going plunge in iron ore is about as steep as it can get.
Source: Business Insider reported
Last week Nev Powers, CEO of Fortescue Metals Group, predicted that iron ore prices would settle between $60 and $65 as higher prices were “unsustainable.” Goldman Sachs also reiterated a $60 price target last week. The chart above shows that prices were in a hurry to drop toward these bearish predictions. The main question now of course is whether price will stop here. Typically sell-offs in commodities significantly overshoot presumed levels of support.
The usual suspects have lined up for blame for the price collapse: there is a huge supply issue exacerbated by weakening demand dynamics. From the Telegraph:
“Global oversupply has been blamed for the latest move in prices, while a slowdown in the Chinese car sector has hit steel prices in the country. This has resulted in steel mills opting to buy cheaper iron ore that is stockpiled in ports, rather than the higher-grade, seaborne metal supplied by the likes of BHP and Rio.”
Clyde Russell from Reuters pointed to the massive supply of inventory in March – ironically a month that also saw record Chinese steel output:
