COLUMN-Iron ore rallies on small BHP output deferral? Ridiculous – by Clyde Russell (Reuters U.S. – April 23, 2015)

http://www.reuters.com/

LAUNCESTON, Australia, April 23 (Reuters) – While it’s well-known that markets can have irrational short-term moves, the 4 percent jump in Asian spot iron ore on Wednesday must be a more extreme case.

Spot iron ore .IO62-CNI=SI jumped to $52.90 a tonne from $50.80 on April 20, continuing its rally from the record low of $46.70 reached on April 2.

On the surface the catalyst for Wednesday’s spike was BHP Billiton’s announcement that it would defer an expansion of its output of the steel-making ingredient from 270 million tonnes a year to 290 million tonnes.

The future loss of 20 million tonnes from a market that’s oversupplied by multiples of that amount clearly isn’t a sound basis for a price rally. What it does show is a market where many participants are keen to call a bottom, and are happy to grasp onto any positive news as justification for a price rally.

It also shows that many in the market weren’t really reading into this week’s quarterly production reports from BHP Billiton, Rio Tinto and Brazil’s Vale.

Vale, the world’s biggest iron ore miner, produced 74.5 million tonnes in the first quarter, a gain of 4.9 percent from the same period a year earlier.

Second-ranked Rio Tinto actually produced more than Vale, mining 74.7 million tonnes, a gain of 12 percent over the year earlier period.

Rio Tinto affirmed its target of reaching 350 million tonnes of production in 2015, which will more than likely see it knock Vale off the top perch.

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