Iron demand hollowed out following Chinese steel production
Post Date: 31 Aug 2012 Viewed: 379
In China, Iron ore accounted for 20.5% of total exports in 2011, followed by coal on 14.9% and third-placed gold just 5.1%. According to Robert Rennie, an Analyst at Westpac, “China’s record steel production earlier this year hollowed out demand for iron ore through mid-year. The fall in prices is feeding on itself as some buyers default, adding to excess supply in Shanghai.”
As noted last week, this is “a clear and present danger for AUD beyond the Fed’s next decision”, as the oversupply should take many weeks or months to play out.
“This weight should keep chipping away at AUD/USD until it looks more fairly priced, at say 1.00-1.01. There is still support from other commodity prices, with the Westpac Commodity Futures Index holding close to highs since May.” Rennie adds..