The recent surge in the price of iron ore should be seen in the context of improving sentiment towards industrial commodities in general. The even larger price falls that occurred before have also left lots of room for (more) surprises on the upside. However, the underlying fundamentals are still poor: iron ore remains in structural oversupply, with plenty of low-cost production now ready to meet any cyclical pick-up in demand. With speculative pressures at work too, this makes us doubly wary of drawing any firm conclusions from iron ore prices about the health of the global economy.
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