Behind Iron Ore’s Roller Coaster Ride in 2017

Iron ore prices have remained very volatile this year. After reaching a peak of $95 per ton in February 2017, despite market participants’ concerns about higher supply and weakening demand, iron ore prices hit a low of $53 per ton in June. After hitting this low, they again rebounded to their current level of ~$69 per ton.

Concerns of tighter credit conditions in China limited iron ore’s gains in June. These concerns were allayed to some extent due to the higher data print in China, after which iron ore saw a mini-rally in its price.

Iron ore’s most recent rebound was supported by stronger-than-expected demand in China. The economic data out of China were positive for the overall commodity outlook, especially for iron ore. China’s iron ore imports totaled 539 million tons in the first six months of the year. At this pace, imports will cross 1 billion tons and surpass last year’s record of 1.02 billion tons.

On July 18, 2017, Rio Tinto (RIO) released its 2Q17 production results and lowered its iron ore production outlook for 2017, which supported already-high iron ore prices.

The rebound has also supported the stock prices of iron ore miners (XME) such as Vale (VALE), BHP Billiton (BHP), Rio, and Cliffs Natural Resources (CLF).

In this series, we’ll discuss the factors responsible for the recent weakness and subsequent rebound in iron ore prices. We’ll look into factors such as demand indicators for China’s steel supply and demand outlook in hopes of seeing the bigger picture in the iron ore sector.

We’ll start by looking at analysts’ sentiments regarding the outlook for iron ore prices.