Pete Wargent blogspot

Co-founder & CEO of AllenWargent property buyer's agents, offices in Brisbane (Riverside) & Sydney (Martin Place), and CEO of WargentAdvisory (providing subscription analysis, reports & services to institutional clients).

4 x finance/investment author - 'Get a Financial Grip: a simple plan for financial freedom’ (2012) rated Top 10 finance books by Money Magazine & Dymocks.

"Unfortunately so much commentary is self-serving or sensationalist. Pete Wargent shines through with his clear, sober & dispassionate analysis of the housing market, which is so valuable. Pete drills into the facts & unlocks the details that others gloss over in their rush to get a headline. On housing Pete is a must read, must follow - he is one of the better property analysts in Australia" - Stephen Koukoulas, MD of Market Economics, former Senior Economics Adviser to Prime Minister Gillard.

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"I've been investing for over 40 years & read nearly every investment book ever written yet I still learned new concepts in his books. Pete Wargent is one of Australia's finest young financial commentators." - Michael Yardney, Australia's leading property expert, Amazon #1 best-selling author.

"The most knowledgeable person on Aussie real estate markets - Pete's work is great, loads of good data and charts, the most comprehensive analyst I follow in Australia. If you follow Australia, follow Pete Wargent" - Jonathan Tepper, Variant Perception, Global Macroeconomic Research, and author of the New York Times bestsellers 'End Game' and 'Code Red'.

"Pete's daily analysis is unputdownable" - Dr. Chris Caton, Chief Economist, BT Financial.

Friday, 6 March 2015

MOAR selling of ore

Limit down

Haven't even gotten around to updating my charts, but new lows overnight as iron ore hit its "limit down" overnight, meaning declines of 4.5 percent to $59.30/tonne.

We haven't seen such low spot prices since 2009.



Supply continues to pump

The latest Port Hedland export figures show export volumes up by 28 percent year-on-year at more than 35 million d/mt per month as supply continues to flood the market.

More than 85 percent of that cargo is destined for China and Taiwan.

Pilbara Ports has issued a number of media releases in recent weeks noting record single shipments, record vessels on a single tide, and record shipments on a single tide.


Indeed, the posturing of the larger and low-cost producers suggests that downward pressure on spot prices will continue as far as the eye can see.

The Reserve Bank went to some lengths in its SOMP to point out that Chinese iron ore producers sit at the sharp end of the cost curve and therefore it is expected that it will be mostly mines from overseas which are shaken out first by this epic downturn.

Whether of not you believe in the integrity of the data is another matter entirely, but the RBA held the view that the lower cost Australian and Brazilian miners should fare much better.

That said the RBA's chart did show that Australia does have a number of smaller high-cost producers which were already sailing perilously close to the wind - and spot prices have fallen by US$20/tonne since then.

Investing

By coincidence, I was discussing this from an investment  perspective only yesterday. Not a good time to catch falling knives, I'd suggest.


Iron ore miners have experienced a couple of months of brief respite as prices have stabilised.

Meanwhile, Fortescue  Metals (FMG) has arranged to push back its colossal debt load, but with another 5 percent off the spot price we could see the share price walloped today.


It's east to be a smart alec after the event of course, but as I looked at here previously in a little more detail FMG's capital structure had long made it a dreadfully risky proposition for mine.

As for some of the marginal producers and juniors, the end could now be nigh.

The Wrap

Not a lot new to add as a conclusion, except:

-diversify;

-focus on industrials;

-don't have a strategy based around picking turning points in individual companies; and

-diversify.