That’s propelled zinc to a 10-year high, above $1.40 per pound. But reports the last few days suggest another metal may be poised for even bigger gains.
Qualivian Investment Partners Up 30% YTD; Long ORLY Thesis
Qualivian Investment Partners commentary for the second quarter ended July 30, 2020. Q2 2020 hedge fund letters, conferences and more “Short-term investors will accept a 20% gain because they didn’t spend the time to develop the conviction and foresight to see the next 500%.” - Ian Cassell Executive Summary Readers of investment letters fall into Read More
Here are the data points.
Open interest in iron ore trade hit a record in key Asian trading hub Singapore. With the Singapore Exchange saying that open interest for contracts on high-quality iron ore lump product soared to 72,150 lots in July.
That was a 13% rise from June’s open interest of 63,804 lots — which was itself a new record at the time.
Traders said China’s current environmental crackdown is the major reason for the surge in iron ore trading. With iron ore lump product being a cleaner alternative for Chinese end users — as compared to other competing products like sintering fines.
At the same time, another iron ore-related metric is surging: shipping rates for iron ore transport vessels.
Shipping rates hit their highest levels of 2017 for capesize vessels sailing from all major iron ore producing nations — including Australia, Brazil and South Africa — to China. With current sailings from Australia selling for $7.50/tonne.
That caps a run that’s seen shipping rates for these routes rise as much as 50% since early July. Showing that demand for iron ore into China has ratcheted up significantly in just a few weeks.
All of which jives with reports that China’s steel markets are booming. At the same time as domestic Chinese supply of input metals is drying up due to environmental inspections and mine shutdowns.
Iron ore prices have responded to this push — with benchmark prices up from less than $55/tonne in late June to $75/t currently.
That’s still well off the highs of near $90 that prevailed this past March. And less than half of the $180 rates that we saw a few years ago. Watch for a potential squeeze in supply to propel prices back toward those levels.
Here’s to coming around,
Article by Pierce Points