As expected, the iron ore market has traded up to new highs today with the DCE futures trading up to 861.5 and the Dec offshore trading to a high of USD 122.99. Iron ore is following the steel Rebar that continues to push higher on strong industrial and property data with output in October remaining above 90 million tons (Bloomberg).
As highlighted a few weeks back it is about balance, high demand/output is being met by growing port inventories that are now at over 132 million tones (Steel Home/Bloomberg). This would imply that any slowdown in consumption has the potential for an aggressive knock on effect for the iron ore market, based on the stockpile build.
Countering the imbalance that we are starting to see between supply and demand is the steel margin that has now risen from CNY 50 to CNY 270 (Bloomberg). If history has anything to teach us it is that if the margin is there, then the stockpiles will be ignored. In theory this trend remains in place until steel prices turn.
Asian trade deals have done little for the Capesize futures in recent days with the slide lower continuing. However, downside momentum is slowing down with the December futures USD 225 lower to USD 12,375 -1.8%. The futures have been showing signs we could see a momentum slowdown soon and this could be the early signal for the Thanksgiving trade that was brought to our attention a few days back. Elsewhere on the curve the Q1 21 closed at USD 7,800 -0.65 and the Cal 21 at USD 12,775 – 1.2%.
The Panamax has not been suppressed by the negativity in the Capesize market and continues to push hard with the December futures up 7.7% to USD 10,450. Let the tail wag the dog (or maybe the macro economics on the Asian bloc trade deal). Whether it was the futures causing the physical to a good bid or just the overall sentiment is not relevant, what is important right now is price. If the futures go much higher the trend becomes neutral rather than bearish, and that will bring with it the question of seasonality. Could it be a happy Christmas for Panamax owners this year?
The Supramax have held in bull territory mainly on the back of the Panamax with the Dec futures up 1.8% to USD 9,900, whilst the Q1 21 was up 0.3% to 8,000 and the Cal 21 closed at 9,100 + 0.8%. Intraday Price and momentum remain bullish at this point with USD 10,040 the key resistance level to follow as below it the trend is bearish but neutral above.
The talk of the town for the oil market remains the potential delay in output hikes (Bloomberg). With price in a current bull move OPEC is trying their best to talk oil higher. The reality is they should probably wait for the market to go down before they try the old cartel squeeze. Vaccines for COVID have Brent in a good place as the sentiment is pushing the fuel higher. Bullish until the market tells us otherwise, 7 billion is a lot of vaccines and will take time suggesting OPEC should hold the headlines for now. Brent is currently down 0.9% to USD 43.49.
Finally, if you trade Base metals and have not read out our Zinc report, here is the link. FIS Zinc Technical Report https://fisapp.com/wp-content/uploads/2020/11/FIS-Zinc-TECHNICAL-REPORT-17-11-20-2-1.pdf
Have a nice evening
Data source FIS and Bloomberg
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