Iron ore prices declined for a second successive day, impacted by Chinese weather concerns and the prospect of further temporary curbs on steel output in China’s North.
As Business Insider reports, benchmark 62% fines fell 0.7% to $73.36, combining for a total 1.5% drop over the past two days. 58% fines remained effectively stable with a one-cent decline and 65% Brazilian fines dipping 0.5% to $87.70.
Here’s their chart:
Source: Business Insider
Weather important again for iron ore
The Ministry of Ecology and Environment released a statement flagging the risk of severe smog in northern China until 14 January.
In turn this increased speculation that output curbs would be introduced.
As Reuters reports, analysts at Huatai Futures are saying the following:
‘Iron ore prices could be volatile in the near-term due to restrictions on sintering plants…But there will still be some support for prices as steel mills are expected to replenish their stocks ahead of Chinese new year in February, while shipments from overseas miners may fall in the coming weeks.’
Thinking about how long winter production curbs will continue
Below you can see the weather in Hebei through to the 20th.
100% cloud coverage through until the 17th, and then visibility drops off on the 18th 19th and 20th.
It is also sitting at 97% humidity with limited winds — perfect conditions for smog.
The question is, how long will the production curbs go on?
Perhaps it will end on the 14th, but the weather seems to be pointing in the opposite direction.
With the wind picking up on the 19th and 20th, this may be the best time for the smog to clear.
Finally, it is worth noting that visibility drops off at the end of the 10-day period as well — lending further credence to the theory that the smog alerts and production curbs may continue for longer than expected.
While we are by no means meteorologists at Markets & Money, the idea here is to help you think more clearly about iron ore, among a host of other topics.
We will keep you posted about future developments.
For Markets & Money
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