Intermodal Weekly Market Report, Tuesday 28th February 2017, Week 8

Market insight By Linos Kogevinas

Commercial Executive, Cotzias Intermodal Shipping Inc.

2017 is looking like it will be a good year for a number of commodities. Following the price recovery witnessed in 2016 across a number of commodities, the price of iron ore, zinc, copper, oil and natural gas appears poised to continue its upward trend.

Specifically, industrial metals were some of the largest winners of 2016 and this trend has continued in 2017 so far. Iron ore was the foremost gainer making a strong recovery from the lows of a disastrous 2015, with prices reaching USD82.4/tonne in December.

The climb has continued in 2017 with yesterday’s (27/02) price closing in excess of USD 87 /tonne, a far cry from 2015’s levels. While iron ore and steel futures did exhibit a slow-down last week, they jumped again on Monday by ~4% signalling the bullishness of the market. The latest 4-month rally has left a positive impression on market players, with mining giants such as Vale or BHP expecting a very strong year.

In any discussion regarding iron ore, it is important to take a look at the most influential nation in this market, China. While there has been some anxiety regarding China’s increasing production in 2017 (expected to increase by 0.5%, up to 825m metric tonnes), it is also important to note the increase in domestic demand, as China is expected to consume approx. 87% of this production.

Iron ore tends to follow Chinese steelmaking trends and the increase in infrastructure projects has driven up demand for steel, with Shanghai rebar hitting its highest price since February 2014. As China continues to provide support to the construction sector mainly through partnerships with private sector businesses on public infrastructure projects, this interior demand is expected to hold up for the rest of the year as well. This coupled with expected steel production limitations in 2017 leads to strong price expectations.

Whole weekly report you can download here