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Buying iron ore was fleeing the economy, not betting on it

Episode

The extreme

There was an easy reading for what the Brazilian stock market did in that late May of 2024, and it was wrong. Commodities priced in reais rose to the top of the intermarket grid, and anyone could mistake that for optimism. It wasn't. What pushed iron ore up was not appetite — it was a real at R$ 5.13 that repriced, in local currency, everything that earns abroad. On the other side of the same screen, the domestic cycle was sinking to its absolute floor. Buying the exporter was not betting on the economy; it was the opposite, it was seeking currency shelter while fleeing domestic consumption. In numbers: Commodities (R$)/IBOV jumped from z −0.08 to +1.60 — 1.67 deviations in thirty days — while Cyclical/Non-Cyclical fell from −1.49 to −2.68. Risk appetite had zeroed out (Perene Risk from 7.3 to 0.0) and mood stayed on the floor (Ânima at 28.4).

What happened next

The leadership did not rise in a straight line — it took the most tortuous path possible. In August 2024, iron ore lost its shine: Commodities (R$)/IBOV crossed from z +0.45 to −0.39, heading to the weak side, while the flight from the cycle deepened (Cyclical/Non-Cyclical from −1.38 to −2.40). Then November 2024 delivered the rawest version of the same thesis: the ratio shot up from z +1.09 to +3.07 — three deviations, the most extreme point in the entire grid —, with the dollar at R$ 5.81. And it confirmed who was in charge: commodities in dollars barely moved (z −0.78). It was the exchange rate doing all the work. Until, in May 2025, the shelter gave way (z +0.52 to −0.25) and the damage migrated to Financials/IBOV.

What did not happen

Anyone who read May's jump as the start of a clean commodities rally got whipped. By August the ratio had already crossed into weak terrain, before exploding to +3.07 in November — it was not a staircase, it was a seesaw. And it was never an economic bet: the domestic cycle only sank further, never confirmed. The leadership wasn't permanent either — a year later, it had changed hands.

The honest verdict

The reading named the right force: exchange rate, not appetite. But a lead born from the dollar lives and dies with the currency, not with conviction — and the path swung from the top to the center, back to the extreme, and finally to delivery. The May 2024 episode matured at +4.6% (a hit), but modest and over a thin sample of six cases. A vault that fills because the currency depreciates depends entirely on the currency staying that way.

Continue reading: The exchange rate that ruled 2024 · The end of the commodities reign · Commodities that only pay in reais →

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Characters: Commodities · Dollar