Iron ore is back!

I noted in a post on Friday that signs were suggesting the worst may have past for the iron ore miners this year.

Well, spot really turned it on yesterday with the biggest one-day gain of the year.

Here’s the latest from Reuters. There was undoubtedly a little short-covering happening in yesterday’s move. Dalian futures rose again today but the most-traded (Jan) rebar contract was flat.

The larger debate now is whether this move heralds a pronounced rebound as in 2012, when prices almost doubled between early September and late December. I have previously detailed why I think the restocking rally will not be anywhere near as aggressive this year, and that this view can only be undermined by a ‘big bang’ stimulus in China.

The recent bullishness has been stoked by an apparent loosening of credit conditions in China. This should support mortgage lending and support property prices, however I remain highly sceptical that the government will allow credit to flow freely enough that it reboots the boom. I therefore see current measures as aimed towards arresting the slide in property, which has been turning increasingly nasty of late, rather than reigniting the excesses of previous years.

NAB business confidence slips again

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