LAUNCESTON, Australia, June 11 (Reuters) – Iron ore’s ongoing run above $100 a tonne is begging the question as to how long a price rally can sustain on fear of an event that is yet to present itself in the evidence.
The surge to a 10-month high on June 8 of $105.75 a tonne in spot iron ore for delivery to China MT-IO-QIN62=ARG, as assessed to by commodity price reporting agency Argus, was largely built on market concerns that shipments from number two exporter Brazil would be hit by coronavirus shutdowns at mines.
The price has eased slightly since the high to end at $103.85 a tonne on Wednesday, but it has been above the $100 level on seven of the last nine trading days.
The spot price is also up 30% since the low so far in 2020 on March 23, but to be fair part of this rally has been the resumption of economic activity in top importer China after the lifting of the restrictions aimed at curbing the spread of the novel coronavirus.
While Chinese demand is anchoring the iron ore market, the froth in the price is driven by fear that Brazil’s exports are likely to drop.