On Friday we felt that there should still be another move higher for iron ore in this cycle, with our rule of alternation suggesting we should base between RMB 820 – RMB 811 but ultimately needed to see a pullback that held above the RMB 798 level. The Singapore holiday has been kind to us with the futures basing at RMB 819.5 before rallying back to a high of RMB 845. With Singapore back open tomorrow we may see some more direction in the physical market, at this point we still feel the futures should trade above RMB 850 on the onshore with the offshore futures looking like they could still test the high at USD 121.78. Yesterday’s session closed 1.09% higher at USD 120.30 with the current session ending the day just 20 cents lower.
A slow start to the week on freight with prices moving down on low volume in the Capesize futures due to the Singapore holidays. A new low has formed and with it a positive divergence on the intraday charts, the trend is bearish but with little volume it could signal the bear trend is nearing exhaustion. We will know more tomorrow as it is hard to gauge a market that is effectively closed, which freight has been today. Dec USD 12,725 -5.4%, Q1 21 USD 7,850 -4% and Cal 21 12,925 – 0.9%
The Panamax has fared better in the sense it is holding its price, but the market has been inactive and rangebound, with the Dec and Q1 21 futures both down 1.5% to USD 9,700 and USD 8,175, respectively. Likewise, the Cal 21 ended the day -0.6% at 9,762. The Supramax futures have followed the same pattern due to the holidays with very light volume. Dec was down -0.8% to USD 9,725 with the Q1 21 u/c at 7,975 and the Cal -0.3% to 9,025.
On Friday we noted highlighted the sterling performance of oil on the back of a Covid vaccine before highlighting the issues ahead. Our point had been that the market was corrective and not bearish, with Monday being a day for the bulls. A great call? Perhaps. More likely, the announcement that a second, potentially even better vaccine is showing great results in the testing phase is the driver behind the market, but we will take it.
Where now for Brent with all this good news? USD 48.61 is our target based on the information to hand. Will it hold up there is a different question and one we covered on Friday.
Elsewhere in the world, Base Metals opened like a sprinter on steroids, due to the gracious acceptance tweet of ‘he won but’. That was enough to put the greenback into a spin in the Asian session meaning base caught an early bid supported by Asian data and the news over the weekend of a new Asian trade deal (BBC, Bloomberg, Sky).
An array of reasons to be bid base in the early session looks to have missed Europe and the U.S. with Nickel being the first to give back its gains and trade below the close of Friday. Copper and Alu have also retreated but remain in positive territory at this point. Zinc and Lead were the two slow starters of the day but like the tortoise they have beaten the hare to remain near their highs. If you do not know the story, then you are probably the hare!
Have a nice evening.
Data source FIS and Bloomberg
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