We mentioned the collapsing Baltic Dry Index yesterday and illustrated this with a chart of the soaring inventories in China of iron ore. The warehouses are full and this is bearish for iron ore, BDI and the AUD.
But….
When the stockpiles are considered as a % of steel production (and thus as a "stock to consumption" ratio), the figures are less alarming. You can see below that Steel production has rocketed higher as well, and iron ore stockpiles this year are actually lower as a % of total steel production (144% vs 157% according to our commodities team). So this steel production chart is a big mitigating factor when considering the Iron Ore and BDIY charts
But….
When the stockpiles are considered as a % of steel production (and thus as a "stock to consumption" ratio), the figures are less alarming. You can see below that Steel production has rocketed higher as well, and iron ore stockpiles this year are actually lower as a % of total steel production (144% vs 157% according to our commodities team). So this steel production chart is a big mitigating factor when considering the Iron Ore and BDIY charts
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