By Giles Coghlan, Chief Currency Analyst at HYCM
Bearish factors for Iron Ore
The risk is for Iron ore to lose more value this week as the factors are stacking up in favour of sellers which could lead to a falling second half of the year for the commodity. The initial bullish factors that boosted Iron Ore for the first half of the year are now receding. Here are some of the bearish factors for Iron Ore in the second half of the year according to Bloomberg’s market’s live blog:
1. Firstly, China’s steel industry PMI’s have now fallen back into contractionary territory. This indicates future demand could wane.
2. Vessel -tracking data has pointed to rising exports of Iron Ore as the supply chains get going gain and;
3. The indication is that China’s port holdings have now expanded their holding s for a third week in a row.
4. The Brazilian miner Vale is stating confidence that despite the rising COVID-19 cases it can still bring a lot of Iron Ore to market in the second half of the year. According to CFO Luciano Siani Pires this means that Iron Ore prices should fall as the supply levels meet the current demand.
5. The country of Australia which has a large Iron Ore export component to its GDP is showing rising export levels. Australia’s Port Headland, which is the main maritime gateway to the nation’s mighty Pilbara mining headland, is expected to release record levels for June flows.
So, the tightness in the Iron Ore market which was characteristic of the first half of the year looks like fading into the second half of 2020. Expect sellers on any retracements higher as long as this remains the case. One risk to this outlook would be if rising global COVID-19 cases result in further lockdowns and disruption to supply chains.
Trade with HYCM