Iron Ore Rallies Into Bull Market After BHP Billiton Shift
Comment of the Day

April 24 2015

Commentary by Eoin Treacy

Iron Ore Rallies Into Bull Market After BHP Billiton Shift

This article by Jasmine Ng for Bloomberg may be of interest to subscribers. Here is a section: 

Iron ore advanced into a bull market after BHP Billiton Ltd. curbed expansion plans and supplies from higher-cost mines dropped, easing concern global output will outpace demand and feed a global glut. Miners’ shares jumped.

Ore with 62 percent content at Qingdao rose 5.5 percent to $57.81 a dry metric ton on Friday, the highest since March 16, according to Metal Bulletin Ltd data on its website. The benchmark is still 60 percent below the peak of $144.18 reached in August 2013.

?Iron ore has jumped 14 percent this week after BHP said it was curbing the pace of its expansion by deferring port works in Australia. A floor in prices may now be forming, according to Australia & New Zealand Banking Group Ltd. and Pacific Investment Management Co. There’ll be no net growth in supply in 2015 as new low-cost output is offset by mine closures, CLSA Ltd. said Tuesday.

Eoin Treacy's view

It’s a little hasty to declare iron-ore is in a bull market. However the decline from $140 accelerated to recent low and a mean reversion rally may now be underway. The iron-ore oligarchy of BHP Billiton, Rio Tinto and VALE pursued a deliberate policy to drive prices lower more than a year ago and have succeeded in driving higher cost producers out of the market. 

There have been a number of bankruptcies not least African Minerals and London Mining. Additionally the decline in prices has necessitated emergency measures among a number of miners to contain costs which has reduced potential for supply to increase further. With iron-ore prices down significantly over the last year, the decision of major producers to restrict investing in additional supply may be the catalyst the market has required. 


Both BHP Billiton and Rio Tinto have steadied within their overall ranges and have been supported by their respective competitive yields. 

Anglo American has at least steadied in the region of the psychological 1000p.

South Africa listed Kumba Iron Ore posted its first upward dynamic this week since September following an accelerated decline. 

Australia’s Fortescue Metals has also lost downward momentum. 

Brazil’s VALE has at least steadied above $5 

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