Chinese iron ore inventory still a price risk

A couple of charts below from Morgan Stanley updating Chinese iron roe inventories. Steel mill days of use are a very good leading indicator for the spot price:

Iron ore days of use at mills of 29 days is low relative to history but not excessively so and it is fair to expect this ratio to continue to fall as the iron ore glut becomes embedded in expectations. Any restock here is likely to be shallow and brief unless mills get wind of a change in the Chinese property market. That is even more so given the following chart:

Port inventory days of use remain very high. If mills want to, they still have the inventories to mount another assault on the iron ore price.

Share

About the author

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.