For iron ore, if April was a party then May’s been the aftermath. Benchmark prices are headed for the biggest monthly loss since August 2012 as a rally driven by a speculative frenzy in China segued straight into a back-to-reality slump when the fervor faded.
Ore with 62 percent content has lost 24 percent in May to unwind April’s 23 percent rally, when prices posted a third monthly gain, according to data from Metal Bulletin Ltd. The raw material has collapsed 29 percent since peaking at more than $70 on April 21, and last week dipped below the $50 level.
The commodity’s boom turned to a bust as regulators in China moved to prevent the frenzy from getting out of hand and signs emerged of increased supply, including higher port stockpiles. Steel-product prices that soared in April, lifting mills’ margins and encouraging output, have since retraced, denting iron ore demand. Goldman Sachs Group Inc. warned last week iron ore will probably extend its drop in the second half amid a rising global surplus.
‘We’ve had a roller-coaster ride,’ Dang Man, an analyst at Maike Futures Co., said from Xi’an, adding while April’s gain had its roots in fundamentals, speculation soon took over as hot money poured in. ‘The turning point came when regulators and exchanges began to curb excessive speculation.’
This post was published at David Stockmans Contra Corner by Bloomberg Business ‘ June 1, 2016.
Recent Comments