by Chris Becker
Yet another record high in iron ore prices yesterday as spot prices barrel in on the $200 level, while rebar and coking coal futures took a breather, as calls begin to mount to “stabilise” the market.
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Demand continues to drive price, according to S&P Global Platts:
“What we are witnessing is the continuation of a demand-driven trend that began exactly a year ago, when China saw a fast rebound in economic activity following its rapid exit from lockdown, which was immediately matched by a sudden spike in steel prices,” S&P Global Platts said.
By the end of 2011, the price of the steelmaking material had fallen to $US139 a tonne. After trading in a narrow range through the first half or so of 2012, the bottom fell out and the price tumbled to $US90.50 by the end of 2012.
Iron ore did not breach the $US100 mark again until May 17, 2109. The current rally began a year ago and has been gathering pace bolstered by resilient demand for steel in China, now strengthening demand for steel elsewhere in the world and concerns about supplies.
“And as the world turns to infrastructure to stimulate its post COVID-19 recovery, and as other industrial metals show comparable rises, it could indeed be reasonable to ask how much further this rally could go.”
Reuters is reporting that the “China Iron and Steel Association (CISA) called on the government to play a bigger role when the market “malfunctions” and to improve policies for the futures market amid sky-high iron ore prices”:
“The speculation of iron ore prices were focused on falling portside inventories last year … and now on the mismatch of different products,” Luo Tiejun, vice chairman of the CISA, told a briefing on Tuesday.
Luo said the supply side for iron ore is highly centralised and makes the sellers decision-makers. He also said current pricing mechanisms and futures delivery regulations made it easier for speculators to go long on iron ore.
The steel association wants China’s securities regulator to pay more attention to improving current futures rules – like the proposal for dynamic premiums and discounts for iron ore futures – instead of launching more products.an of the steel body.