Hard for iron ore to trade below $100/ton sustainably: Macquarie

We saw some headlines around a drone attacks on Russian refineries and so on, and tensions in the Middle East. I feel like they're really sort of the default to story. So there isn't a lot of geopolitical premium being priced in at the moment. What do you say there's? I think it's hard to say there's none given what's been been going on over the course of this sort of past year or so. A bit of a residual there makes sense, but but I don't think that there's a large geopolitical risk premium at this point. And really that reflects the fact that although we've had so many potential disruptions, if we go back, obviously, just to the starting point of Russia's invasion of Ukraine, and then obviously subsequent events over the past year in the Middle East, none of them have actually led to a meaningful disruption to supply. And I think therefore, market understandably is largely discounting it. So that, you know, in an asymmetry perspective, there's scope for a much greater geopolitical risk premium. But in terms of our base case, it's just not something that we think should happen at the moment because there isn't really anything that that would yet justify it. And so I think the market's response is quite, it's quite fair in that sense. Marcus, moving over to what's happening with iron ore, which has lost ground to now the lowest in over two months and partly because of what's happening over in China. We've been talking a lot about this and of course the lacklustre steel consumption is up partly to blame. Do you feel that iron ore has further to run to the downside? I think in the very short term, if you're going to have a move below $100 a tonne, that's that's perfectly plausible. It's very evident that the market is is in a physical surplus. You can see that in the build, the build that we've got in port stocks. But I think it's hard within say the, the, the back half of this year to trade below 100 for any sustainable, for any sustainable basis. And the reason for that really in our, in our mind is twofold. I think 1, if you look at marginal seaborne supply and, and the biggest portion of that at the moment is India. If you look at the ship tracking of Indian exports, there's very, very price sensitive. And we've saw earlier in the UN prices briefly dipped a bit below current levels that that material pulled back. And if that were to happen again, I think the, the loss that you would see means that we would actually then start to expect a meaningful draw in port stocks such that you get a bit of price support. And the other thing is that if you're going to have a, a really substantial sell off and to trade at low levels for an enduring period, I think you need to see weaker steel production than we currently have. And although, you know, a policy mandated production cut is, is always a possibility and I would stress it would need to be on a national level, not just a regional one to have a big impact on the market. But they're on a commercial basis, although mills margins are not good, I don't think they're low enough on an aggregate, the aggregate level to drive big production cuts. And when we look at how mills are currently behaving, they're actually optimizing for productivity at the moment, not optimizing for cost minimization. And that would also suggest that they're not about to cut. So that our base case would be that actually the prices towards the bottom end of a range here could trade a little bit lower, but that you should be seeing some support come in around this sort of $100 level. And and we'd actually think that on a sort of three to four month few prices are probably pushing back up to sort of 110 or so.