Iron ore has remained under pressure recently, falling to a low last week of $83.42 on the September contract. It closed the week at $84.06 a tonne up 64 cents.
But also on Friday, something remarkable seemed to happen in iron ore 62% Fe futures trading. Not only was there there a rally in prices, but the further out on the calender curve you went, the more the price rose.
That suggests that buyers are starting to find value as the price heads toward $80.
In Westpac’s excellent monthly look at the iron ore market, The Furnace, senior economist Justin Smirk said that:
Westpac is expecting prices to hold around US$80/t before moving back to US$95 by year end. But a lot depends on Chinese miners and the marginal miners exporting to China. The big three’s (BHP, Rio Tinto & Vale) have an average cost below the current spot price so the adjustment in supply has to come from elsewhere.
December futures are showing signs of trying to bottom, so perhaps other traders are thinking the same as well?