Chart of the day: Iron ore soars
Chinese steel production peaked at about 823 million tonnes in 2014 before dipping to 803 million in 2015. This year’s estimate is 750 million tonnes as unprofitable steel mills are closed, according to Reuters data. Therefore, Monday’s limit up rally for Dalian iron ore futures was probably a shock to many – but not to readers of this column as we had pointed to the rounded base forming since November. Some suggest the surge is unsustainable because of backwardation, but technically rising open interest on the break above the top of the trend channel and steady volatility hint at further short-covering and fresh buying to come. Resistance levels abound, the most important at 380 yuan per tonne.
Nicole Elliott is a technical analyst