Golden week is over and for iron ore it means the bulls are back in town. Headlines on Bloomberg noted that combined exports from Port Hedland and Brazil are the highest ever, whilst steel inventories which normally see a 15% to 20% decline in Q3 have seen an increase of 3%. However, an Analyst at Citibank Inc is quoted: “the absolute level of inventories is not a cause for concern,” they said. Instead, the slowdown in the rate of drawdown indicates demand growth rate is stabilizing, while supply has caught up.
The offshore November futures closed 2.37% higher (USD 3.00) at USD 120.98 from the previous day. The big question is, is it driven by reaction, sentiment or something else? In today’s fluid world it is difficult to categorize anything, but the FIS handle has a simple theory for today’s little push.
Yesterday the FTSE 100 was up, in the afternoon session there were headlines flying around about the U.S stimulus package, which pushed the S&P 500 up 0.8% from the previous days close, but up nearly 4% for Golden Week. This resulted in the Shanghai Composite Index opening with a bullish gap and closing 1.7% higher. For those that follow these markets you will have noticed there is a herd mentality. The fundamentals may still be positive for iron ore, but this move to us looks like it was sentiment driven, on the back or rising global stock values.
The Panamax futures market promised so much going into the European close last, night having seen a USD 575 rally from the market low. The European open gave market longs some hope with the futures pricing briefly up to USD 12,525, however these levels failed to hold with the midday 4-hour candle opening below the previous candles balance point, resulting in new lows going into the close. Current values for the November futures USD 12,100 (- 2.45%), Q4 20 USD 11,825 (-2.27%) and Cal 21 USD 10,275 (-0.6%).
The Capesize futures continued their decline having broken the key USD 20,550 support in the November futures yesterday. The futures sold off into the open before quickly finding a base with November values at USD 19,375 (- 4.91%) Q4 20 USD 20,800 (- 3%) and the Cal 21 entering the close at 13,550 (-0.5%)
Supramax futures proved to be the most resilient of the three sisters closing only USD 100 lower in the November at USD 10,925 ( -0.91%) with the Q4 20 down 0.5% at USD 10,612 and the Cal 21 unchanged on the day.
Brent futures started the day on a positive note with the futures trading above the previous day’s high. However, this was also into a negative divergence on the one hour chart meaning upside moves were short lived, with prices trading down to the daily pivot point at USD 42.93 before spending the rest of the day around the USD 43.20 level. The Gulf of Mexico is still not up and running, the market looks over extended, but it will not get sold until the storm has passed.
That’s a wrap – have a good weekend and may your God go with you.