COLUMN-Iron ore industry wavers between hope and reality: Russell
(The opinions expressed here are those of the author, a columnist for Reuters.)
By Clyde Russell
PERTH, March 9 (Reuters) - If the price of the product your company produced had just experienced a 20 percent price surge in one day, its biggest jump ever, it would be reasonable for you to be overjoyed. But maybe not if you are an iron ore miner.
This month's leap in Asian spot iron ore prices coincided with the annual Global Iron Ore and Steel Forecast conference in Perth, capital of Western Australia state and home to the iron ore operations of three of the world's four biggest producers.
Spot iron ore .IO62-CNI=SI soared to $62.60 a tonne on March 7 from a prior close of $52.40, a record in percentage terms and the biggest dollar move in four years.
The problem for the insiders at the Perth conference is that as much as they would like to believe the move is sustainable, nobody really does.
The question that came up repeatedly was whether there was any fundamental justification for the gain, or whether it's just the market responding to a sentiment-driven rally by retail Chinese investors trading on the Dalian Commodity Exchange.
While it's certainly possible to construct a case that the outlook for Chinese steel demand has improved slightly in recent months, it's hard to argue that there has been enough of a change in the underlying market fundamentals that would support a prolonged recovery in iron ore prices.
The weekend meeting of China's ruling Communist party certainly provided sparks of good news, with a commitment to increase economic stimulation, as well as to rationalize the massive overcapacity among loss-making steel mills. Continuación...