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Dave Forest

Dave Forest

Dave is Managing Geologist of the Pierce Points Daily E-Letter.

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The Latest Price War In The Commodities Sector

Some very unusual data coming out of Brazil this week. Showing that the nation is bucking global trends when it comes to one commodities market.

Iron ore.

The odd thing is, exports of iron ore out of Brazil are continuing to rise -- according to government figures reported by Platts.

Brazil shipped 28.73 million tons of iron ore in April. Representing a notable 16.3% increase from the 24.7 million tons the major producer exported in April 2014. Related: Does Russia Really Own 20% Of The US’ Uranium Reserves?

The April figures were actually down slightly from March -- when Brazil shipped 30.78 million tons of iron ore.

All of which suggests that producers here are continuing to mine and sell product unabated. Even as global prices have been in freefall.

Today, iron ore is selling for around $55 per ton. Down 60% from the $140 per ton price that prevailed as recently as early 2014. Related: Oil Sector May Not Cause Financial Apocalypse After All

That tumble has caused producers in many key exporting nations to cut back on sales. Australia and West Africa, for example, have been notably impacted.

But Brazilian producers seem unfazed by the price decline. Even though government figures show that the value of exports here have been cut nearly in half -- with shipments in April carrying a total value of just $1.16 billion, as compared to a value of $2.06 billion for shipments in April 2014.

This willingness to sell more metal at lower prices backs up Brazil's reputation in the iron ore market. Specifically that the country (and especially its top producer Vale) like to use downswings in the iron market to punish their competitors. Related: Is This The Top For Oil Prices For Now?

Vale enjoys some of the lowest production costs in the business. And historically, the company has used this advantage to continue turning out supply during times of low prices -- in order to put a coffin-nail in the business of global competitors with higher mining costs.

This could go on for some time -- and it's going to be difficult for any recovery in the iron ore price to happen until it stops. Watch the data from Brazil for signs of when a let-up might be starting.

Here's to an iron will,

Dave Forest

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