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Factors That Will Determine if Iron Ore’s Rally Will Continue


Jul. 26 2016, Published 11:05 a.m. ET

The iron ore price rally

Commodities (COMT) have rallied in 2016 despite many analysts’ expecting the contrary. Iron ore in particular has enjoyed a spectacular run from after the Chinese New Year through July. As of July 22, 2016, iron ore prices have gained 32% year-to-date (or YTD).

On the whole, iron ore prices have been quite volatile. This has raised several questions as to what caused the spike and whether or not such price rallies are sustainable.

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Performances of iron ore miners

Given stronger iron ore prices YTD, iron ore miners have recuperated from some of their losses. Cliffs Natural Resources (CLF) has outperformed, with a YTD rise of 328% as of July 22, 2016.

Fortescue Metal (FSUGY) and Vale (VALE) have risen by 114% and 68%, respectively. Rio Tinto (RIO) and BHP Billiton (BHP) (BBL) have risen by 7% and 6%, respectively.

In this series

In this series, we’ll analyze the demand-supply fundamentals for iron ore and see whether the commodity’s recent surge can continue for the remainder of 2016 and beyond. We’ll look at Chinese steel production growth, supply-side growth, speculative trading, inventory, and analysts’ recommendations in order to arrive at a potential future upside or downside in prices. These factors should help you to form a view on the future direction of iron ore prices.

In the next part of this series, we’ll look at the current supply dynamics in the iron ore sector.


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