by Chris Becker
Another down day across the board for the iron ore complex:
Heres the chart for spot ore – no sign of a deceleration yet, still in steady downtrend mode:
And the others – Dalian futures:
And rebar:
There’s several developments today/overnight that could see further volatility, not withstanding the drops in the iron ore miners on the ASX (I’ll have a very close look at that later this morning).
First, its seems the tugboat captains are on strike! From SteelGuru:
Tugboat captains at Australia’s top iron ore export port have approved plans to go on strike for up to three days in a fight for better pay, which could halt a quarter of the world’s iron ore exports.
A spokeswoman for the Fair Work Commission said that Australian Maritime Officers Union members overwhelmingly approved 8 different proposals ranging from a 2 hour to a 72 hour work stoppage.
The vote by the Australian Maritime Officers Union follows approval by tugboat deckhands to strike for up to a week. Neither group has set a date for a strike and the deckhands have said they would hold off until at least late June while they try to resolve issues with tugboat operator Teekay Shipping.
The tugboats guide iron ore carriers in and out of Port Hedland, which handles more than half of Australia’s iron ore exports. The strike threat comes as producers have been ramping up output, which has led to heavier ship traffic.
So there’s your lull in supply, but what about demand – is it real? The copper rorts highlighted earlier this week are now spreading from soybeans to iron ore, again. From Reuters:
The Chinese probe into financing of copper and aluminium may spread to other commodities such as iron ore and soybeans, an executive of a commodity hedge fund said on Wednesday.
Banks and trading houses have been making urgent checks on the security of metal holdings in China, sparked by a suspected fraud at Qingdao Port, the world’s seventh biggest. Police are investigating the duplication of warehouse receipts by a third-party firm on metal cargos used to obtain financing.
“I would say it’s going to spill over from copper into iron ore, into soybeans. A huge amount of apparent demand in China is through shadow financing and holding stocks so you can have the cash,” said Doug King, chief investment officer of RCMA Capital, which runs the $150 million Merchant Commodity Fund, which is managed from Singapore and London.
Pledging commodities to a bank, often using a warehouse receipt as proof of ownership, has become a popular way of raising finance in China, helping create huge stockpiles of metals at some ports in China.
That old chestnut of “underlying demand” not being demand at all.
Stay tuned.