Iron ore prices for February 27,2017: Spot up. Paper down overnight. Coking coal futures deflating again but still enjoying a huge contango to spot presumably on the assumption of more Chinese mine closures. Steel mill margins are looking good as coking coal deflates. The trigger yesterday was more mooted steel output cuts, via MB: The
Iron ore price, steel price and futures published daily
The contemporary seaborne iron ore price first emerged in 2003 when the Chinese development model shifted up a gear. Indian suppliers broke free of an annual contract pricing system that had been dominated by Australia, Brazil and Japan for decades.
As Chinese demand surged, traditional supply and pricing mechanisms could not keep pace. Indian miners in Goa and Karnataka had surplus supply and filled China’s marginal new needs outside the old benchmarking system.
But it still wasn’t enough and other non-traditional suppliers began to emerge in South America and Africa. These needed more dynamic pricing mechanisms and by 2008 Platts, Metal Bulletin and The Steel Index were publishing a daily iron ore price.
As the Chinese demand surge continued, by 2007, major Australian iron ore miners were charging enormous premiums to prices from five years earlier. The annual benchmarking system began to strain to the point breaking, including significant diplomatic tensions between Australia and China. This culminated in a proposed merger of BHP and RIO Tinto which triggered panic in Beijing as it feared an already supply-constrained market and soaring iron ore price would by made worse by monopoly pricing. The Chinese SOE, Chinalco, moved the buy a blocking stake in RIO Tinto.
However, the GFC intervened and deflated tensions as Chinese demand collapsed. But Chinese steel mills found themselves still tied to very high prices and an annual iron ore price benchmark that did not reflect the new reality. Many defaulted on cargoes and walked away from deals.
To fight the downturn, China unleashed an enormous fiscal and monetary stimulus that soon had China building more than ever. The demand for iron ore rocketed to all new highs. With the memory of contract defaults fresh in their minds, major Australian miners, led by BHP and CEO Marius Kloppers, abandoned the annual benchmarks, forcing Chinese steel mills to adopt a short term iron ore price using spot and quarterly contracts. Brazil joined in in 2010.
The spot iron ore price soared to all new highs and triggered a global wave of new supply from producers such as Fortescue Metals Group, Ferrexpo, Kumba Iron Ore, Anglo American and Sino Iron.
With the rise of the short term iron ore price market, iron ore derivative markets grew. First in the Singapore on the SGX and later in China as the Dalian Commodities Exchange and the United States at Chicago Commodities Exchange (CME). Iron ore derivatives could hedge and future price iron ore output.
These last developments coincided with the peak in the China boom and prices began to fall from 2012. After peaking above $190 per tonne, the iron ore price collapsed into the $30s in 2015 as new supply outstripped demand.
Ahead were still many years of oversupply, a lower iron ore price, consolidation and mine closures.
Also Check – Australian Dollar
Find below our daily feed of market analysis
Iron ore prices for February 24, 2017: Spot faded. Paper roared back overnight. Steel sure looks toppy. Port stocks added another 1.8mt last week to hit an astonishing 129.4mt. At the current rate of accumulation we will hit capacity by mid-year at 160mt. Given it is only this hoarding that is holding prices at
From Macquarie: Our survey respondents are the most bullish they’ve been in over five years. This bullishness is clearly reflected in recent price moves in steel and iron ore. Source: Macquarie Bank The bullish sentiment is reflecting expectations for post Chinese New Year demand rather than recent orders…orders have been more subdued as is to
Iron ore prices for February 23, 2017: There’s a pin pressuring the spot price bubble. My guess is we fall pretty fast here back to the $80 level then flatten out before going lower later in the year with the big destock. Paper was smacked overnight. Importantly, steel rolled. Coking coal is fading, thermal levitating. Bears
Spot down. Paper flat. Steel still rising. Coals deflating. Bears are everywhere now with BHP and FMG warning on overheated prices. It’ll pop when it pops. Nobody does bubbles like the Chinese. Longer term, nothing has changed, via the AFR: “The future is kind of pessimistic,” said Frank Zhong, the chief representative of the World
Iron ore futures are flat after overnight falls suggesting a decent hit tomorrow but holding on despite Chinese house prices and sagging coking coal futures. The miners are down: Big Gas is weak despite strong oil. OSH is flying on a Goldman upgrade: Big Gold appears headed for a correction: The Big Debt bull is still
Via Deutsche: Remains a FCF and de-gearing story near term BHP has reported 1H FY17 underlying NPAT of US$3.2b and EBITDA of US$9.9b, slightly above our US$3.0b and US$9.8b estimates respectively. Operating cash flow was strong and net debt decreased by US$6b HoH to US$20.1b, but was assisted by a US$2b non-cash benefit. Capex guidance
From Credit Suisse: ■ Newswires are alive with stories that China will reintroduce the 276 work day for coal mines from mid-March to mid-Sep, although it is yet to be confirmed by the NDRC. This despite the QHD coal price of Rmb590/t lying above the Rmb500-570/t target range, and China’s coal inventories continuing to shrink,
Quite right from Macqaurie: Iron ore and coking coal prices have shown much divergence in their spot physical prices in recent weeks. Year to date spot 62% Fe iron ore prices are up over 16%, while spot premium coking coal prices are down by over 32%. Given that both are almost exclusively used for
From Stephen Haggard at the Pieterson Institute for International Economics. Beijing announced the following: “In order to implement the NSC Resolution No. 2321, according to the Foreign Trade Law of the PRC, MOFCOM Announcement No. 81 of 2016, China suspends coal imports from North Korea for the rest of the year (including shipments that have been
The Big Iron rocket is punching skywards again today as Dalian adds another 1% to overnight gains: FMG is powering towards its highest intraday price since the GFC and will presumably break the closing price today: A technician would suggest an $8 target then on to the all time high. Macquarie has more on what could
Iron ore prices for February 20, 2017: Off we go again. Spot jumped. Paper ripped overnight. Steel surged. The two coals took off. The trigger is obvious via Reuters: China’s steel mills and traders were scrambling to find alternative supplies of coking coal for steel making on Monday after Beijing slapped a surprise ban
Iron roe price update for February 16, 2017: Spot down. Dalian recovered losses overnight. Steel solid. Coals still hanging on. Vale printed a record in 2016, via Bloomie: Vale SA posted record iron-ore output that beat analysts’ estimates as the top producer of the steel-making ingredient feeds growing Chinese demand. Copper and nickel production were
From Credit Suisse: China’s steel traders are restocking early and strongly China is into its seasonal restock ahead of construction season, and steel stocks have climbed to match 2014 trajectory to-date (Figure 3). CISA warehouse and Tangshan Billet stocks climbed over the Lunar New Year holiday, but the really solid growth has been steel traders’
Iron ore prices for February 15, 2016: Spot down. Steel up. Coals warming. Here’s why, via Bloomie: China, the world’s biggest producer and consumer of coal, is considering reinstating output restrictions to avoid the return of a glut after easing limits during winter. The National Development and Reform Commission may resume mining curbs that
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
Iron ore charts for February 14, 2017: Qingdao spot pulled back. Benchmark rose a little to $92.23. Steel did some serious catching up. The two coals are still weak. S11D is upon us: Brazilian mining giant Vale shipped in January 264,400t of iron ore from its flagship US$14.3bn S11D Carajás mine in Pará state. We
Via Domainfax: Rio Tinto chief executive Jean-Sebastien Jacques said the curtailment of small, inefficient steel mills in China was driving demand for the higher grade stuff. “It is absolutely clear that the Chinese government is pushing hard to restructure the high polluting blast furnaces and therefore reduce capacity but when you look at what would
Via Bloomie: “China’s real estate sector is the biggest X-factor for the steel market globally this year,” Ivan Szpakowski, chief investment officer at Academia Capital LLC, said in a phone interview from North Carolina last week. “We’ve clearly turned the corner into a downward phase of the property cycle, and I do think there is