Iron ore prices fell yesterday, February 24, 2021:
The proximate trigger was the tightening of output restrictions in Tangshan as pollution levels surpassed healthy levels. In the past, these types of restrictions have proven bullish for iron ore if they triggered a rise in steel prices but we seem to be so over-heated here, with steel mill margins so poor, that any news is bad news.
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For now, prices are still getting seasonal support from Brazil:
Lower shipments from Brazil are supportive of iron ore prices, according to Brazilian XP Investimentos. In the week ended on February 21, Brazilian shipments decreased 8% WoW (5.5 tonne), following heavy rain in the north of the country.
The daily index for iron ore 65% Fe Brazil rose 1%, to $200 a tonne on Monday, an all-time high.
“High rain volumes at major ports will continue to represent a challenge for Brazilian players during 1Q. So far, Brazil is running below guidance,” the company said.
But that is going to ease and volumes climb sharply in Q2. There’s more coming from Kumba as well after it announced its annual results with 37mt over 2020 expected to climb to 40-42mt this year.
Outside of Brazil, the coming supply is all incremental but it’s adding up. I still think we are seeing the year’s best prices right now and over the next few months.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
