Iron ore to be in the spotlight next week

The return of Chinese investors could lead to a sharp rise in the price of iron ore next week, given the likelihood of significantly lower Brazilian supply. However, the prices of other industrial metals may fall on Thursday if, as we expect, China’s January trade data point to weaker commodity import demand. We may also see a dip in oil imports as prices were rising last month and, in our view, the strength of imports recently has been more about opportunistic buying than strong underlying demand. That said, the trade data will be distorted by a shift in the timing of Chinese New Year. Meanwhile, the oil market will be closely watching the demand forecasts in the OPEC (Tuesday) and IEA (Wednesday) monthly reports. It appears likely that demand will be revised down given the recent weak data out of the euro-zone and China and that this will prompt further falls in the oil price. On the production front, the OPEC report is expected to confirm that Saudi Arabia produced less oil than its quota in January.