Dry Bulk Commodity Forwards Are Surging On Expectations Of A Rebound

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Iron ore forwards have had an extremely strong week, according to data from the Iron Ore & Steel Derivatives Association.

August 2010 forwards have had the largest gains, indicating expectations of a near-term rebound:

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Despite concerns about Chinese demand growth, higher stockpiles of steel, a global growth slow-down, and Chinese plans to consolidate its steel industry into fewer players, iron ore and steel are rallying.

Where there’s demand for steel, there’s demand for many other commodities as well.

There’s also demand for ships. This, combined with a stabilised Baltic Dry Index and today’s overall stock market rally, means it’s a sea of green for dry bulk stocks today.

August & September could get interesting for the commodities space.

The iron ore forward curve

Source: Iron Ore & Steel Derivatives Association

Spot price index for iron ore

Source: Iron Ore & Steel Derivatives Association

Also rebounding: Steel (HRC, Rebar, and Wire Rod) forwards' 1-week performance

Source: Iron Ore & Steel Derivatives Association

The steel forward curve

Source: Iron Ore & Steel Derivatives Association

There has been a spike in volume

Source: Iron Ore & Steel Derivatives Association

Source: Iron Ore & Steel Derivatives Association

Source: Iron Ore & Steel Derivatives Association

Steel capacity utilization could tighten and rise going forward

Source: Iron Ore & Steel Derivatives Association

The rebound has come despite growing steel stockpiles.

Source: Iron Ore & Steel Derivatives Association

We'd say keep an eye on steel companies and commodities producers.

Source: Iron Ore & Steel Derivatives Association

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