For iron ore, the bearish rhetoric is increasing as we continue to hear about global supply. The November futures have now seen four days of negative price action and this is getting buyers anxious, as the price must be justified when you are USD 40 above 5-year average values. USD 108.84 is the next logical downside target, if this level is broken then we could start getting a genuine bear market feel.
For the mill owners, steel margins are still sitting around the CNY 115 level. If this stays positive, they can keep consumption at high levels. However, if they continue to drop then expect more selling pressure ahead.
For the Capesize market this is not the season to be jolly. Anyone that has looked at a seasonality chart has seen the dangers ahead. It is not a good time for the index, and this is being reflected in futures values with the November down another 6.5% today (USD 1,000,) at USD 17,425. Based on the seasonality and technical charts, if it goes up, expect more sellers.
The Panamax had a long-awaited range break yesterday and continues to see follow through today, with the market down a further 3%. This is a bear market for Panamax with the index down USD 427 taking it by surprise. Momentum might have halved today but the sentiment has not, the market will not get chased down at this point, as the sellers are waiting for higher levels. Buyside price action is likely to be profit taking and hedgers only over the coming days. It is hard to imagine large buyside speculation now without the support of a buoyant physical market.
If the Supramax was sluggish out of the blocks yesterday, then it played a little bit of catch up today with the November Futures down a further 4.19%. There used to be a saying ‘if America sneezes the rest of the world gets a cold’, we could change America to Panamax and the world to Supramax and it would still work.
There is nothing like being at a racetrack, you’re dirt broke and having a bit of a horror, when on the last race of the day you are saved by the 50/1 horse coming in with your final £10 on it.
Well, that’s Brent today, it was having a bit of a nightmare with the futures down 4.38% at one point to USD 41.56, it looked like it would close on its lows. Out of the blue the 50/1 has come home in the form of the EIA numbers which showed a 3.8-million-barrel drawdown, as well as a 7.25-million-barrel drawdown in distillate supplies (Bloomberg). OK, we have not romped home on a 50/1 yolk, but we are down only 2% on the day.
We will take that.