Here are 4 excellent charts from Macquarie on the iron ore market

Photo: Kevin Frayer/Getty Images.

Compared to other commodity markets, iron ore rarely gets a mention outside of major iron ore producing nations such as Australia and Brazil, and end users such as China.

However, that all changed this week. The benchmark spot iron price rocketed by nearly 20% on Monday, it’s largest one-day increase on record. Continued volatility, including one of the largest declines on record on Wednesday, has kept it in the news, pushing crude oil into a rare second place when it comes to commodity market focus.

Given the level of interest there’s been this week, it’s an opportune time to revisit what has occurred, and what likely lies ahead, in terms of demand and supply for the iron ore market.

Ian Roper, Macquarie’s Singapore-based bulks and steel analyst, has duly delivered, providing an excellent research note containing a multitude of interesting charts for investors to mull over.

Here are four of the charts that immediately caught out our eye.

Chinese domestic iron ore supply has fallen steadily in line with movements in the spot price, forcing many high cost producers to cease production.

And here's the current cost curve for iron ore miners supplying the Chinese market. The green line showing the current spot price has now moved up to $58 thanks to this weeks surge, meaning many smaller miners and some Chinese state-owned enterprises are profitable at these levels.

And here's global supply and demand for iron ore, both looking backwards and in the years ahead. In 2017 and 2018, Macquarie forecasts that seaborne supply will grow strongly at a time when global demand remains weak.

And here's where the growth in supply will come from. Outside of Australia's Roy Hill mine, most of the growth will be concentrated in Brazil, partially in response to the Samarco mine coming back into production.

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