Why Iron Ore Prices Are Falling after Hitting a 2-Year High



Iron ore prices

Seaborne iron ore prices have almost doubled in the last year. That follows three consecutive years in which prices have fallen. Prices hit $83.60 per ton on December 12, 2016, the highest level since September 2014.

Although iron ore prices have fallen almost 9.0% since then, they’re headed for the highest yearly rise since 2008. Many market participants have attributed part of this rally to speculative activities in the iron ore futures trade. Authorities have now seriously clamped down on these activities.

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Performance of iron ore miners

With stronger iron ore prices YTD (year-to-date), iron ore miners have recuperated from some of their losses. Cliffs Natural Resources (CLF) has outperformed with a YTD rise of 426.0% as of December 19, 2016. The company is also greatly influenced by the US domestic steel market, which is on a high after Donald Trump’s victory in the US presidential election.

Fortescue Metals (FSUGY) and Vale SA (VALE) have risen 240.0% and 144.0%, respectively. Rio Tinto (RIO) and BHP Billiton (BHP) (BBL) have risen 34.0% and 41.0%, respectively.

Series overview

In this series, we’ll analyze the supply-demand fundamentals for iron ore. We’ll look at the reasons behind its impressive rally and its consequent fall in the last few days. We’ll also look at the outlook for iron ore prices for 2017.

In addition, we’ll take a look at Chinese (FXI) steel production growth, supply-side growth, speculative trading, inventory, and analyst recommendations. These factors should help you get a clear view of the future direction of iron ore prices.

Let’s start by looking at the dynamics of the market for coking coal, another steelmaking ingredient, and how that’s affecting iron ore prices.


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