Daily iron ore price update (virus risk)

Iron ore prices for February 2, 2021 saw Tianjin spot rise alongside Chinese steel markets. Overnight Dalian futures fell:

Iron ore price February 2, 2021

Iron ore price February 2, 2021

Chinese port stocks of iron ore are rising again:

China iron ore port inventories Febraury 2021

China iron ore port inventories February 2021

I would normally see the rise in Chinese iron ore inventories as bullish for prices. It probably is for a few months yet. But, with steel profits crushed, there is far less capacity in mills to restock raw materials so this is now something of a stalemate.

Q1 weather disruptions are still playing havoc with supply, both in Australia and China. Via Westpac:

Iron ore exports dropped to the lowest in a year, as Lunar New Year holidays and cold weather in China impacted demand. While the Feb outcome is actually the 3rd lowest volume of exports in 4 years, it is up 6% yy after Tropical Cyclone Damien impacted exports and damaged port infrastructure in Feb 2020. That lifts the 3myy trend to +1.8%, but that is clearly flattered by weather comparisons.

Australian iron ore exports January 2021

Australian iron ore exports January 2021

But Brazilian volumes did better coming in at 24.05mt, up 4mt tonnes year on year but still 5mt below 2019 pace so there’s plenty of room for improvement.

Still on Brazil, I am worried about the emergence of this new virus strain which appears to have already lifted case counts significantly:

Brazil virus cases Feburary 2021

Brazil virus cases February 2021

The outbreak appears to centered in the north in the neighboring state to Para, iron ore central.  It bears watching.

There is nothing yet to change my outlook. Firm pricing through April then down.

David Llewellyn-Smith
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