Steel margins remains supported at CNY 301; however, the iron ore market has now started to come under pressure with yesterday’s futures closing 1.12 % lower at USD 123.35. Price dropped from a six year high after BHP flagged near-term downside risks to Morgan Stanley at a roundtable last week. BHP cited a rebound in Brazilian production, record run rates from Australian producers as well as elevated inventories of iron ore lump and pellets. (Bloomberg) A lower close is suggesting that market longs are paying heed to this, now we need to see if there is going to be some bear revenge to try and squeeze them out.
The Capesize index continues to underwhelm at this point, rising just USD 124 today (+1%), leaving the futures little room for maneuver as upside sellers remain heavy. Dec futures did trade as high as USD 13,625 early on but buying support soon waned with the futures closing 1.7% lower, at USD 13,275. Movement in the Q1 futures has been very rangebound with the price 0.3% lower at USD 8,200 but in a tight range of only USD 125. The Cal 21 on the other hand closed 1% higher at USD 13,100. We have seen this before in the market where the Cal has shown the direction before the rest of the curve, it will be interesting to see tomorrow as momentum will need to see a clear shift higher to support any form of sustained bull move.
December Panamax has been the mirror to the Capesize today with the futures closing 1.7% higher at USD 10,775. Early gains failed to see any follow through as the market looks to the physical to see if this market is currently sustainable. The technical is asking questions with the market looking vulnerable, however without confirmation this intraday trend remains bid, with sellers not yet willing to take it on. Q1 21 closed 1.3% higher at USD 8,737 and the Cal 21 0.8% higher at USD 10,050.
All bets were off this morning when the December Supramax traded above the USD 10,550 Fractal resistance, resulting in a high of USD 10,825, up 5.4%. The December looks to have the support of the index, which was up USD 247 to 10,473 today, suggesting there could be more upside in this move now the market has created a higher high. Q1 21 closed 3.5% higher at USD 8,437 with good volume changing hands, whilst the Cal 21 closed 1.1% higher at USD 9,212. If the Supramax keep holding at higher levels having made a higher high, then it could have the Panamax bulls looking to test the USD 11,400 fractal resistance in the December, and with it the resilience of the market bear.
We questioned the Brent futures on Friday having made some bold calls earlier in the week. We should have kept faith as the futures are 1.7% higher at USD 45.87. We highlighted the market would need to see some good news for it to push higher. Unfortunately, it has not been good news, it has been an event. Brent and WTI are both pushing higher after Bloomberg reported armed militants had attacked Libya’s National Oil Corporation headquarters in Tripoli. Will it be enough to fulfil its technical destiny? It has made a higher high, it has fulfilled it achieved the minimum for cycle completion.
Data source FIS and Bloomberg
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