Just a little dig, from Money Morning’s Greg Canavan today:
Today’s Money Morning starts with an apology…
On Monday, I wrote that the iron ore price had breached the US$100/tonne level. That claim was technically correct, but I used a price that is rarely quoted in Australia, and I didn’t stipulate that was what I was referring to.
I was talking about prices traded on the Dalian Commodity Exchange, whereas you normally hear about prices for iron ore delivered to the Chinese port of Qingdao.
Sorry about that.
To clarify, the Dalian Commodity Exchange currently has the most heavily traded iron ore contract at 716 yuan a tonne, equivalent to US$104/tonne. And for iron ore delivered to the port of Qingdao, as reported by Metal Bulletin, the price is currently sitting at US$91.71/tonne.
I’m not sure why there is such a large discrepancy. But from now on I’ll stick to the port of Qingdao price, as that better reflects the prices received by Aussie iron ore companies.
Still, at over $90/tonne, the iron ore market is very strong. That’s because demand for steel in China is strong. Once again, China’s state directed stimulus has increased construction activity over the past year or so and put a rocket under the iron ore price.
Actually you’re still wrong. Tianjin is the benchmark price. And Dalian is a future not spot price plus it is not over $100. That would imply contango. When you remove the taxes and charges that constitute roughly 20% of the future you get a six month price of $82.46 as I write. Still in backwardation!
