Iron ore price plummets amid Chinese speculative mania – by Frik Els ( – April 28, 2016)

On Wednesday the Northern China benchmark iron ore price fell 5.6% to $60.50 per dry metric tonne (62% Fe CFR Tianjin port). Iron ore is now down more than 12% from 16-month highs hit last week according to data supplied by The Steel Index, but the steelmaking raw material still boasts a 41% rise in 2016 and a 60%-plus recovery from nine-year lows reached mid-December.

Given that it forges half the world’s steel and consumes more than 70% of the 1.3 billion tonne seaborne trade, the iron ore market is reliant, more than any other commodity, on the Chinese economy. The surge in iron ore over the past four months has come mainly on the back rapidly rising steel prices in China and commodity investment fever that’s gripping the mainland.

Copper fell victim to Chinese speculators a year ago when a hedge fund called Shanghai Chaos conducted a bear raid on copper futures. Attention has now shifted to iron ore and other metals including aluminum.

The first signs that the fundamentals of the physical iron ore trade was no longer much of a factor driving prices came on March 7. The price surged 19.5% in a single day – in absolute terms the day-on-day rise was roughly half of the price of contracted iron ore during the early 2000’s under the old ‘annual benchmark’ system, which ended in April 2010.

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