Iron Ore Gets a Break—But This Hedge Fund Says It’s Going Lower – by Jasmine Ng (Bloomberg News – June 29, 2017)

Iron ore’s finally catching a break with a jump back into a bull market. But don’t bank on the recovery lasting through to the year-end, according to Academia Capital, a commodities and emerging markets-focused hedge fund, which warns that fundamentals will probably deteriorate.

“I expect iron ore prices to end the year lower, but that the market is vulnerable to a short-covering rally before we get there,” Ivan Szpakowski, chief investment officer at the fund, said in an email. “Iron ore supply and demand is likely to worsen in the second half.”

The raw material is closing out what’s been a bruising quarter on a very strong note, with spot prices climbing back into the $60s a metric ton and reaching the highest in eight weeks.

The commodity remains well below a peak in the mid-$90s hit in February amid persistent concerns about rising global supply and prospects for softer demand in China. Academia highlights a potential weakening in consumption in the country’s property market.

“Steel demand from the real-estate sector is likely to weaken over the second half of 2017 and even more in 2018 as government tightening measures and slowing sales hit actual construction activity,” said Szpakowski, a former Asia head of commodity research at Citigroup Inc. Miners including Brazil’s Vale SA are ramping up output, and supply is “abundant,” according to Szpakowski.

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