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Iron Ore And The Baltic Dry Index - Barometers For The Global Economy



  • Iron ore has recovered recently.
  • Shipping rates continue to languish.
  • China holds the key.
  • U.S. infrastructure rebuilding couldprovide a spark.
  • Three ways to position for a reboundin the industrial sector.

We have seen a rocky road for the prices of industrial commodities since late 2015. Ferrous and nonferrous metals and many dry bulk commodities prices fell to multiyear lows in late 2015 and early 2016. Most of these raw materials fell to significant bottoms and entered into a period of price recovery throughout 2016. Following the U.S. Presidential election, industrial commodities prices exploded to the upside as President Trump ran on a platform that focused on infrastructure rebuilding in the United States. Additionally, the optimism about an increase in economic activity in the U.S. translated into optimism about the prospects for growth China and other nations around the world. On a percentage basis, the gains from the 2015 and early 2016 lows were nothing short of astounding when it comes to many raw material markets. Base metals, including copper, aluminum, nickel, lead, and zinc posted a 26.77% gain in 2016. However, the strong price action in the metals markets could not compare to two other markets that are often barometers for economic growth and activity. In 2016, the price of iron ore gained 110.34%, and the Baltic Dry Shipping Index posted a 102.32% increase on a year-on-year basis.

As optimism has declined over the first six months of 2017 given the roadblocks to legislation in Washington DC, iron ore and the BDI which both more than doubled in price in 2016 have given up part of their gains. As of June 30, iron ore was down 22.54%, and the BDI fell 4.27% so far in 2017. At the same time, base metals are still 4.82% higher than their December 2016 closing prices. Over recent weeks, the price of iron ore has recovered from lows in the middle of June, which could be an omen for other industrial commodities prices.


This article was written by

Andrew Hecht profile picture
Weekly commodities commentary and calls, from a Wall Street veteran
Andy Hecht is a sought-after commodity and futures trader, an options expert and analyst. He is the #2 ranked author on Seeking Alpha in both the commodities and precious metals categories. He is also the author of the weekly Hecht Commodity Report on Marketplace - the most comprehensive, deep-dive commodities report available on Seeking Alpha.

Andy spent nearly 35 years on Wall Street, including two decades on the trading desk of Phillip Brothers, which became Salomon Brothers and ultimately part of Citigroup.

Over the past two decades, he has researched, structured and executed some of the largest trades ever made, involving massive quantities of precious metals and bulk commodities.

Andy understands the market in a way many traders can’t imagine. He’s booked vessels, armored cars, and trains to transport and store a broad range of commodities. And he’s worked directly with The United Nations and the legendary trading group Phibro.

Today, Andy remains in close contact with sources around the world and his network of traders.

“I have a vast Rolodex of information in my head… so many bull and bear markets. When something happens, I don’t have to think. I just react. History does tend to repeat itself over and over.”

His friends and mentors include highly regarded energy and precious metals traders, supply line specialists and international shipping companies that give him vast insight into the market.

Andy’s writing and analysis are on many market-based websites including CQG. Andy lectures at colleges and Universities. He also contributes to Traders Magazine. He consults for companies involved in producing and consuming commodities. Andy’s first book How to Make Money with Commodities, published by McGraw-Hill was released in 2013 and has received excellent reviews. Andy held a Series 3 and Series 30 license from the National Futures Association and a collaborator and strategist with hedge funds. Andy is the commodity expert for the website about.com and blogs on his own site dynamiccommodities.com. He is a frequent contributor on Stock News- https://stocknews.com/authors/?author=andrew-hecht

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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