COLUMN-Iron ore’s “bull market” shows rise of financial trading – by Clyde Russell (Reuters U.S. – August 3, 2015)

LAUNCESTON, Australia, Aug 3 (Reuters) – One of the more fanciful notions from the recent rally in iron ore prices is that the steel-making ingredient is now back in a bull market.

Asian spot iron ore .IO62-CNI=SI does meet the technical definition of being in a bull market, having gained 25.4 percent between its record low of $44.10 a tonne on July 8 and the close of $55.30 on July 29.

Markets are said to be in a bull phase when the rally exceeds 20 percent, likewise they are in a bear period when the decline is greater than 20 percent.

Traders are more likely to talk about dead cat bounces than bull runs where iron ore is concerned, and the fact remains that despite the price rally, iron ore remains down 25.7 percent so far this year and is barely a quarter of what it was at its all-time high in early 2011.

The recent gain in spot prices is actually the second technical bull market already this year, following the 40 percent jump between the low of $46.70 a tonne on April 2 and the peak of $65.40 on June 11.

It’s probably the case that the recent rally in prices will fizzle on the harsh reality of a massively oversupplied market and stagnant steel output in China, the buyer of about two-thirds of global seaborne iron ore.

It’s also worth noting that the so-called bull market was nowhere near as clear in the main iron ore derivative markets in Dalian and Singapore.

Front-month Dalian futures gained only 9.6 percent between July 8 and the close of 369.5 yuan ($59.60) a tonne on July 30, while Singapore Exchange iron ore swaps rallied 12 percent over the same period.

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