Charted: The story of iron ore’s slide to a 10 year low

Iron ore miners have invested over $100 billion in new projects and expansions since the start of the decade, resulting in iron ore prices hitting a 10 year low of $52 per tonne (Platts 65% Fe incl. freight)…

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Source: report

…but supplies are set to continue to grow…

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…and all this extra supply will mean even bigger iron ore surpluses…

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…and even lower prices, hurting even the lowest cost producers…

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…so perhaps the Knights Templar are onto something (see this link and here).

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Yemen unrest puts major shipping route at risk

Brent crude is up almost 3.5% to $58.20 per barrel this morning after Saudi Arabia started bombing targets in neighbouring Yemen. Yemen contributes less than 0.2% of global oil supply but it is located on Bab el-Mandeb, the fourth-biggest shipping choke point in the world through which around 3.5 million barrels a day of oil and petroleum passes. Closing the strait would stop tankers from the Persian Gulf from reaching the Suez Canal, diverting them around the southern tip of Africa, adding to transit time and cost. If this worst case scenario did happen the impact would most clearly be felt on the oil market, but the route is a major transit route for the worlds container traffic and so any disruption would also be a drag on world trade and economic growth.2015-03-26_0557

Time is running out for China to support commodity prices in 2015

“With only months left before the mid-year peak in sales of commodity-intensive goods, time is running out for China to support commodity prices in 2015…Instead of delivering its reliable first-quarter seasonal expansion in trade, China’s metal processing industry remains dormant.”

Amid this downbeat assessment Morgan Stanley has slashed its forecasts for base metals in 2015 and 2016. The bank reduced its 2015 estimate for nickel by 23% to $14,815 per metric tonne and copper by 16% to $5,945 per tonne. Although the bank also cut its 2016 outlook too, both nickel and copper prices are still higher than 2015 at $16,094 a tonne and $6,283 a tonne respectively.

China, which last year reported the slowest economic growth in more than two decades, is being buffeted by the twin headwinds of a property slump and excess industrial capacity. Meanwhile a preliminary Purchasing Managers’ Index from HSBC/Markit fell to an 11-month low of 49.2 in March. With Premier Li Keqiang setting the lowest GDP growth target in more than 15 years, growth in base metal demand from China is likely to remain “dormant” over the next few years.

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Source: ABN Amro h/t @CasperBurgering

Related article: Why are aluminium prices falling?

Related article: Seasonal price trends in steel and base metals