White-hot iron ore will cool

The price of iron ore looks “unstoppable”. But the rally may have gone too far.

Andrew Van Sickle
By
published
in Features

Iron ore looks "unstoppable", says David Scutt on Business Insider. One of the main ingredients in steel production, iron ore, was at a record low of $39 a tonne last December, but has since soared by 115% to a two-year high above $80 a tonne. Chinese imports rose to the third-highest monthly total on record in November, partly because the high price of coking coal, another steel ingredient, prompted Chinese steelmakers to opt for imported, higher-grade iron ore instead, as Capital Economics points out. Stronger Chinese steel output, a result of the economic upturn in recent months, has also helped.

But the rally appears to have gone too far. Global supply growth has been restrained of late, but now more iron ore is coming to market from a big new mine in Brazil, notes Reuters. On the demand side, China's reluctance to build up too much more new debt may prompt it to remove stimulus next year.

What's more, as Wayne Gordon of UBS told Business Insider, much of the surge reflects Chinese speculators pouring in they are ignoring very high inventories in their local market.

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Andrew Van Sickle
Andrew Van Sickle
Editor, MoneyWeek

Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.

After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.

His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.

Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.

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