Prices varied across the Christmas/NY gap with some volatility around the $120USD per tonne price for spot iron ore while rebar futures held their ground as we head into the New Year:
The taps are very slowly being screwed by the Chinese government as they continue to look for more self-sufficiency in iron ore supply. More:
China will encourage domestic exploration of iron ore and use more scrap metals to reduce reliance on imports from countries like Australia, while streamlining production quotas for rare earth and tungsten, according to the government.
In the 2021-25 raw material development plan, authorities said iron self-sufficiency would be “significantly” increased by lifting the supply of scrap steel to more than 30 per cent of the total, encouraging domestic mining and reducing steelmaking capacity.
“The raw material industry is the foundation of the real economy and a basic industry that supports the development of the national economy. It is a key area [for China] to gain international competitive advantages,” said the plan jointly drafted by the Ministry of Industry and Information Technology (MIIT), the Ministry of Science and Technology and the Ministry of Natural Resources.
China produced 56.7 per cent of global crude steel last year, 41 per cent of refined copper, and remains a global leader making many metals. But its lack of control over upstream mineral resources is an Achilles’ heel for the world’s second largest economy.
China imported more than 80 per cent of iron ore requirements last year, about 60 per cent of which was from Australia. The high reliance on overseas steelmaking ingredients poses a severe challenge to the country’s highly-prized economic security.“The risk to industrial and supply chains has been exposed given the deglobalisation tide and the coronavirus pandemic. It’s obviously more difficult to expand to the international market,” said the government.
Beijing has long complained about the iron ore pricing mechanism dominated by global miners like Rio Tinto, BHP and Vale. China’s steel industry body demanded an explanation from BHP about the surging cost of iron ore in December last year, before prices went on to reach a record high of US$230 per tonne in May.