Daily iron ore price update (China squeeze)

The iron ore complex is taking it a little more easy into the new calendar year with seaborne prices and Dalian futures lifting on Monday, as firm demand in steel and positive sentiment after the New Year holiday continued:


The Chinese are starting to get real about diversifying away from near total reliance on Australian iron ore, with the release of its latest five-year-plan. Via Reuters:

Seeking feedback on a steel masterplan that will form part of the country’s 14th Five-Year Plan, MIIT said in a document published on Thursday December 31, that one of its goals was to strengthen the iron ore resources for its giant steelmaking industry, including increasing domestic iron ore and ferrous scrap supplies, along with building a network of overseas mines.

China aims to build one or two globally significant overseas iron ore mines by 2025 to boost supply of the steelmaking ingredient and strengthen its pricing power, the industry ministry said on Thursday.

The plan, which is open for public feedback until Jan. 31, also called for increased supply of other steelmaking mineral resources such as manganese and chrome.

China, the world’s biggest steel producer, currently relies on imports for around 80% of its iron ore but it is not known how much of that is from mines overseas in which it holds stakes.

It has domestic iron ore mines with a much lower grade than in top producers like Brazil and Australia, and owns a stake in the Simandou mine in Guinea.

“China will accelerate construction of large iron ore projects in West Africa and Western Australia,” the MIIT said, adding that cooperation would also be strengthened with resource-rich Russia, Kazakhstan, Mongolia, Cambodia and other neighboring countries.

Comments

  1. MathenomicMEMBER

    5 years is ambitious unless we’re talking about known deposits; that being said I dare say the Chinese can achieve the accelerated target.

    Does anyone know what the referenced projects in WA are specifically?

    • Donald Rumsfeld

      The Chinese government stepped in on the Simandou project to get it over the line from the Israeli owner promising to fast track the construction of the rail and port facilities in exchange for Guinneas contract. They started last year (as in 2019 not 2020) and like most of these things will finish a year or two early. The rail link is the only major issue – a big one, mine is already being developed.

        • Din… can you please ppoint me to were China’s National Development and Reform Commission Eve signed off on Simandou as my is they have not… though there are likely some prelim work being done… also they haven’t even secured funding

  2. Donald Rumsfeld

    China placed a ban on all imports of recycled material in 2020. The ban on imported steel scrap and copper for recycling was to be lifted in 2021 as it would be reclassified as a “resource” not as a scrap.

    Chinese government also order mills to cut steel production in 2021.

    Further just like in response to the 2009 global financial crisis the Chinese government unleashed almost $2 Trillion in infrastructure stimulus which required the build up of steel for delivery in 2021. You can see the exact same result in the subsequent 12 months in the ore price then the huge fall off in AUD and ore price.

    The infrastructure stimulus build for iron ore alone is equivalent to almost 40 Burj Khalifa’s –

    The LAST 5 year plan mentioned hydrogen once in passing – the lastest plan has put it as central to China’s transition to carbon neutral – this means a focus on recycling scrap, higher self-reliance on resources, and an end to imports of coal and vastly diminished imports of ore.

Leave a reply

You must be logged in to post a comment. Log in now