The author has been described by News Ltd as an "iconoclast", "Svengali", a pollie's "economist muse", and "pungently accurate". Fairfax says he is a "Renaissance man" and "one of Australia’s most respected analysts." Stephen Koukoulas concludes that he is "85% right", and "would make a great Opposition leader." Terry McCrann claims the author thinks "‘nuance’ is a trendy village in the south of France", but can be "scintillating" when he thinks "clearly". The ACTU reckons he’s "an enigma wrapped in a Bloomberg terminal, wrapped in some apparently well-honed abs."

Friday, August 31, 2012

How low can iron ore prices go?

Again UBS obliges:

- even after a 35% fall in iron ore prices, we actually see more downside risk; that’s because Q3 seasonal weakness ends with a very weak Oct – the weakest trading month, reflecting low liquidity (China has 1-week holiday) > steel inventories lift > steel prices roll over.

- and since more-than-half of seaborne iron ore’s trade is now done on spot-tomonthly terms (only 20%, in 2009), then this trade is more exposed to the underlying fundamentals of the steel trade. Conclusion? At least 4 more weeks of weak prices, in our view.

- lowest short-term price? Pick a number! When there’s a buyers’ strike, price signals become poor representatives of the value of trade.

- but everyone still needs an actual number to think about; as a guide, US$60/t cfr was the GFC low > a buyers’ strike could get us back to those levels very quickly > such a move will probably be sharp and brief.