Another Positive For This Quiet Commodity

You may not hear a lot about it. But iron ore appears to have a lot of good things going for it these days.

Another positive data point emerged this week. With Platts reporting that iron ore inventories at Chinese sea ports have contracted significantly over last year.

As of late December, China’s top 20 ports held 85.9 million tonnes of iron ore. Down significantly from inventories in 2012, which generally ran 95 to 100 million tonnes.

To be sure, this drawdown isn’t a crisis situation. Traders interviewed by Platts were comfortable with the supply level, which equates to between 23 and 28 days of consumption for Chinese steel mills.

But it is a notable reduction in inventories nonetheless. One that seems to mirror a general tightening of the iron ore market globally.

While nobody in the market is panicking yet, a number of key changes are making supply somewhat harder to come by. India’s iron ore exports have fallen to under 20 million tonnes annually. A big drop from the 100 million tonnes the country was shipping just two years ago.

At the same time, demand from other parts of the world remains resilient. Australian iron ore exports have been running strong, in stark contrast to industries like coal–where falling prices have caused cutbacks in supply, and export growth has largely stalled.

Iron’s probably not going to make headline news. But it does look to be a very attractive market right now. One that seems to be growing steadily more prospective.

Here’s to the quiet ones,

Dave Forest

dforest@piercepoints.com / @piercepoints / Facebook

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