Daily iron ore price update (moderation)

The New Year is here and the speculative fest that is the iron ore complex continues to deliver, although the Tianjin spot price did waver over the Christmas break, falling more than 3% to be at its lowest since mid December:

It has to be remembered that the most active iron ore futures on the DCE (Dalian Commodity Exchange) gained nearly 40% in the last quarter of 2020, having leapt more than 20% in December itself. Is 2021 going to be a repeat? Perhaps not if calls for the steel sector to make drastic cuts in crude steel output are heard. Via Reuters:

The Ministry of Industry and Information Technology called on the steel sector to “resolutely” cut crude steel output and ensure an annual drop in 2021.

As the world’s largest producer of steel at 1.1 billion tonnes in 2020, China has shut down 150 million tonnes of annual production capacity from 2016-2020.

“Output cut can further improve the steel sector’s supply and demand situation… break and ease issues of deformed profits due to high raw material prices,” CITIC Securities told Reuters.

Reasonable control of steel production can safeguard profit margins of mills and prevent high prices from getting transferred to the downstream sectors, CITIC added.

President Xi Jinping announced in September that China plans to go carbon-neutral by 2060. The country is the world’s largest energy consumer and greenhouse gas emitter, it mines and burns half the world’s coal, and is the top importer of oil and natural gas.

Transitioning the Chinese economy to carbon-neutrality within a few decades could cost $5.5-trillion, Sanford C. Bernstein & Co estimates.

Wait and see on that resolution….

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  1. China planning on building 1million tons of surface war ships as a part of the 14th Five year plan. Throughout the last (13th) Five Year Plan China have launched 1.7 times more primary surface combatant than the US Navy; China 660,000 tons vs USA 390,000 tons.

    The 14th Five Year Plan will see military spending grow by 47%, with large increases in tonnage in nuclear subs, aircraft carriers and amphibious assault ships. In total 14th Five Year Plan is calling for a million tons of warship to be launched.

    003 x 2

    075 x 6
    076 x 1

    055 x 8
    052D/E x 20

    054 x 20
    057 x 4

    Situations on submarine not clear yet. No news on 095. Currently four 093B are being built, the first is expected to be launched in 2021. Originally the launch was planned for end of 2020 but it was delayed by the pandemic.

    Huludao Shipyard expansion still in progress, once completed it would be able to construct 20 SSN or 5 SSBN concurrently. In the next five years you may see a nuclear submarine building craze unseen before, ever.

    It’s no longer possible for USN to catch up. In 2021 financial year the USN got 22 billion USD for ship building, they would need at least 40 billion USD if they want to have a chance of catching up, this is not including several dozen billion dollars and several years required to expand shipyard capacity.

    At the current rate USN can per year launch about:

    3 frigates
    1 – 2 Arleigh Burke-class destroyer
    1 Virginia class SSN
    1 LPD every three years
    1 carrier every six years
    1 amphibious assault ship every six years


    Good to see they’re find a home for our Iron Ore.