Take physic, pomp

Vale (RIO): Very shortable here

I’m now looking for the right price to short RIO. Fundamentals suck (Inco in bad shape and more layoffs at an office admin level announced this week) and recent news out of China strongly suggests that the recent pickup in steel production is a forced governmental move that has no basis in true demand, thus causing ever greater stockpiling of finished product.

Sorry brazilguys, I know your RIO is big and meaty and I know you’ve already dropped a long way, but there’s plenty of reason to see RIO as a major hedge play to balance longer stuff.

Here’s Reuters with a short report to whack home the issue:


BEIJING (Reuters) – China’s crude steel output was 1.42 million tonnes a day in February, equivalent to about 520 million tonnes a year and a “worrying oversupply”, Deng Qilin, chairman of the China Iron & Steel Association, said on Friday.

According to a Reuters calculation, that means February output totalled 39.76 million tonnes, a 5.2 percent increase on the 37.79 million tonnes produced in December 2008, a longer month and the last month for which data is available.

Deng, who is also president of Wuhan Iron & Steel Group, said his company would cut output by 15-20 percent and aimed for sales of 120 billion yuan ($17.55 billion) this year. ($1=6.839 Yuan)


UPDATE: Not short yet, will look for $13 on Monday

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