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The Iron Ore Futures Collapse Chart That Everyone Is Talking About (Dr Iron?)
TBI ^ | 8-22-2012 | Joe Weisenthal

Posted on 08/22/2012 6:27:18 AM PDT by blam

The Iron Ore Futures Collapse Chart That Everyone Is Talking About

Joe Weisenthal
Aug. 22, 2012, 8:39 AM

You've probably heard the term "Dr. Copper" to describe copper's role in serving as a good bellweather of the global economy.

But all the buzz these days is about iron ore, a key ingredient in steel.

This morning, a hedge fund manager in Europe sent us this chart of front month iron ore futures over the last couple of years.

It's obviously very early, but that is one ugly chart.

Included with the chart he sent this nice, quick overview:

Iron ore is second biggest commodity traded internationally by volume (after oil). It is the main ingredient in the production of steel. China is by far the worlds #1 producer of steel and importer of iron ore (over 60% of seaborne ore goes to China).

While Wall Street focuses on Oil, Natural Gas, Copper etc., Iron ore is a huge commodity that is highly reliant on Chinese demand. While most other commodities are recovering from their lows Iron Ore is crashing. The spot peaked this year at around $150/ton in April (highs close to 190 last year). The spot now is around $105 per ton and falling fast and the futures (now fairly liquid and traded internationally) are pricing q4 below $95/ton.

The drop in the futures of over 10% this week will no doubt show up in the spot price in the next week or so. While Bloomberg, FT etc. report on moves on the spot price they are a bit oblivious to what happens on the futures (spot is a slow moving index, futures are bets on future level of index). While Wall Street doesn't trade iron ore, the major miners

(snip)

(Excerpt) Read more at businessinsider.com ...


TOPICS: News/Current Events
KEYWORDS: commodities; copper; economy; iron

1 posted on 08/22/2012 6:27:29 AM PDT by blam
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To: blam

paraphrasing Andrew Dice Clay, “I got yer commodity super-cycle right heah!”


2 posted on 08/22/2012 6:29:00 AM PDT by babble-on
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To: blam

3 posted on 08/22/2012 6:29:36 AM PDT by blam
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To: blam

If Baraq wins, the coming leg down in the economy will be due to Europe, despite Baraq’s heroic efforts to save them.

If Romney wins, the coming leg down in the economy will be due to Republicans.


4 posted on 08/22/2012 6:32:41 AM PDT by nascarnation
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To: blam
Risk of US double-dip recession rises: S&P
5 posted on 08/22/2012 6:33:23 AM PDT by blam
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To: blam

A big drop in iron ore consumption and price goes hand-in-hand with a drop in met coal usage and the collapse in the BDI (Baltic Dry Index).

Even the Chinese, who fouled up Dr. Copper’s record by stockpiling above their industrial needs, using it as a substitute for T-Bonds as a store of value, aren’t going to stockpile iron as a store of value. If steel consumption is forecast to be down, iron usage and price drop.

Not a good indication.


6 posted on 08/22/2012 6:33:32 AM PDT by Pearls Before Swine
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To: Pearls Before Swine
China's Local Governments Are Still Announcing Massive Investment Plans
7 posted on 08/22/2012 6:38:10 AM PDT by blam
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Comment #8 Removed by Moderator

Comment #9 Removed by Moderator

To: blam

I’d love to see the price of steel drop. Concrete slabs too (a component of which is steel).

I’ve got a couple of metal buildings I need to put up. :-)


10 posted on 08/22/2012 6:44:16 AM PDT by Nervous Tick ("You can ignore reality, but you can't ignore the consequences of ignoring reality.")
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To: Pearls Before Swine

A met coal mine near Trinidad, CO “temporarily” laid off most of their workforce back in June.

The “temporary” idea was to give the market 60 days to clear the “surplus” and demand would pick up again.

Well... it’s been more than 60 days and the mine isn’t re-hiring - nor do they think they will anytime soon.

This mine’s output is shipped in toto to China.


11 posted on 08/22/2012 6:57:40 AM PDT by NVDave
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To: blam

“...the buzz these days is about iron ore, a key ingredient in steel.”

Um, earth to Joe: Iron is THE key ingredient in steel.

You can have steel without carbon, moly, chrome, nickel, vanadium, etc - all those other alloying elements, but no iron means no steel, period, end of discussion.


12 posted on 08/22/2012 7:03:06 AM PDT by NVDave
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To: blam

Re Chinese investment:

If these investments are large, and funded, the demand for, and the price of, iron will rise. Time will tell—there’s a lot of conflicting information being written on what the Chinese situation is.

Also, these projects will have a lead-time from authorization to buildout of a couple of years.


13 posted on 08/22/2012 7:16:23 AM PDT by Pearls Before Swine
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To: Nervous Tick

It never occurred to me that concrete slabs were a commodity product but I suppose they are. Are their standard sizes and structural specifications?


14 posted on 08/22/2012 7:58:00 AM PDT by DManA
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To: Pearls Before Swine

I know the Chinese have invested several %billion in taconite mines in N. Mn over the past 10 years or so. Something of a miny boom up there.


15 posted on 08/22/2012 8:01:19 AM PDT by DManA
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To: blam

Does this mean China has enough ghost cities now?


16 posted on 08/22/2012 8:12:00 AM PDT by DannyTN
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To: NVDave

Note: You can’t have steel without carbon, that’s
what makes it steel. Otherwise it’s just wrought iron.
Cast Iron is when you have too much carbon.


17 posted on 08/22/2012 8:14:40 AM PDT by tet68 ( " We would not die in that man's company, that fears his fellowship to die with us...." Henry V.)
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To: NVDave
A met coal mine near Trinidad, CO “temporarily” laid off most of their workforce back in June.

I have some land near the New Elk mine. It was closed when I bought it but there was a lot of activity the past few years. Sounds like that is ending again.

18 posted on 08/22/2012 8:19:43 AM PDT by MileHi ( "It's coming down to patriots vs the politicians." - ovrtaxt)
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To: Pearls Before Swine

Steel consumption is a pretty good indicator of construction and durable-goods production (cars, appliances, machinery, etc). Looks like people are sharply reducing durable-goods orders, deciding to make what they have last a little longer before replacement.


19 posted on 08/22/2012 8:20:47 AM PDT by PapaBear3625 (A deep-fried storm is coming, Mr Obama.)
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To: DManA

>> It never occurred to me that concrete slabs were a commodity product but I suppose they are. Are their standard sizes and structural specifications?

No, the slab itself is not a commodity as far as I know. The materials that go into a slab (cement and reinforcing steel) are commodities, though.


20 posted on 08/22/2012 8:21:27 AM PDT by Nervous Tick ("You can ignore reality, but you can't ignore the consequences of ignoring reality.")
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To: Nervous Tick
iron ore world wide may be declining....but in the US demand for steel pipe for drilling pipe and pipelines is soaring....

Lead time for big pipeline valves is longest on record.

Thank you fracking companies on the Backan and North Fork.

21 posted on 08/22/2012 8:45:57 AM PDT by spokeshave (The only people better off today than 4 years ago are the Prisoners at Guantanamo.)
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To: blam

the time scales go not back far enough

the chart could be showing a “defestating drop” or it could be showing a pull back form a bubble; with a five-year-back or more chart, that might be clearer

infrastructure building is not a steady state in any economy, which is one reason steel companies have always had difficulties; periods of large infrastructure development slow down, scale back, and come back again, and slow down again, ad infinitum


22 posted on 08/22/2012 9:14:39 AM PDT by Wuli
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To: blam

Double dip recession is what used to be called DEPRESSION. We are in one. We have been in one for 4 years. We will be in one for some time to come. We might pull out of this if Romney wins and is struck by lightning turning him into Ronald Reagan and he has a conservative Republican Congress in which Bohner and other “leaders” have lost their jobs.


23 posted on 08/22/2012 11:38:01 AM PDT by arthurus (Read Hazlitt's Economics In One Lesson)
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To: blam

Might be an opinion reaction to the following. After having read a few of his opinions while following economic news, I suspect that Mr. Weisenthal hopes for conditions that would keep the debt pile high for government incomes, real estate or something else related.

Iron Ore Price to Rebound as China Seeks Cheaper Imports
http://www.bloomberg.com/news/2012-08-21/iron-ore-to-rebound-as-china-seeks-cheaper-imports-commodities.html
[Bloomberg title and link only. No commentary from Bloomberg allowed to be posted at FR.]


24 posted on 08/22/2012 12:15:52 PM PDT by familyop (Duncan Hunter or no-vote.)
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To: tet68

Check out the metallurgy on Maraging steels. You can have steel without carbon, but you must add something else - in this case, nickel.


25 posted on 08/22/2012 5:56:21 PM PDT by NVDave
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