Tianjin benchmark fell 40 cents to $63.85. Coking coal is getting the treatment. Steel is fading. Hard to know where we go from here. We’re entering a seasonally strong period for prices but the combined Fed tightening/emerging market crisis and Trump trade war is developing into a very serious headwind. China knows it, via Reuters:
Iron ore price, steel price and futures published daily
The contemporary seaborne iron ore price first emerged in 2003 when the Chinese development model shifted up a gear. Indian suppliers broke free of an annual contract pricing system that had been dominated by Australia, Brazil and Japan for decades.
As Chinese demand surged, traditional supply and pricing mechanisms could not keep pace. Indian miners in Goa and Karnataka had surplus supply and filled China’s marginal new needs outside the old benchmarking system.
But it still wasn’t enough and other non-traditional suppliers began to emerge in South America and Africa. These needed more dynamic pricing mechanisms and by 2008 Platts, Metal Bulletin and The Steel Index were publishing a daily iron ore price.
As the Chinese demand surge continued, by 2007, major Australian iron ore miners were charging enormous premiums to prices from five years earlier. The annual benchmarking system began to strain to the point breaking, including significant diplomatic tensions between Australia and China. This culminated in a proposed merger of BHP and RIO Tinto which triggered panic in Beijing as it feared an already supply-constrained market and soaring iron ore price would by made worse by monopoly pricing. The Chinese SOE, Chinalco, moved the buy a blocking stake in RIO Tinto.
However, the GFC intervened and deflated tensions as Chinese demand collapsed. But Chinese steel mills found themselves still tied to very high prices and an annual iron ore price benchmark that did not reflect the new reality. Many defaulted on cargoes and walked away from deals.
To fight the downturn, China unleashed an enormous fiscal and monetary stimulus that soon had China building more than ever. The demand for iron ore rocketed to all new highs. With the memory of contract defaults fresh in their minds, major Australian miners, led by BHP and CEO Marius Kloppers, abandoned the annual benchmarks, forcing Chinese steel mills to adopt a short term iron ore price using spot and quarterly contracts. Brazil joined in in 2010.
The spot iron ore price soared to all new highs and triggered a global wave of new supply from producers such as Fortescue Metals Group, Ferrexpo, Kumba Iron Ore, Anglo American and Sino Iron.
With the rise of the short term iron ore price market, iron ore derivative markets grew. First in the Singapore on the SGX and later in China as the Dalian Commodities Exchange and the United States at Chicago Commodities Exchange (CME). Iron ore derivatives could hedge and future price iron ore output.
These last developments coincided with the peak in the China boom and prices began to fall from 2012. After peaking above $190 per tonne, the iron ore price collapsed into the $30s in 2015 as new supply outstripped demand.
Ahead were still many years of oversupply, a lower iron ore price, consolidation and mine closures.
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Iron ore prices for June 20, 2018: Tianjin benchmark was unchanged at $64.25. Paper and steel held on. Normally we would see prices firming through July/August but as happened in H1, trade war fears disrupted seasonal price patterns, forcing it lower earlier then leaving it high later. The same is possible in H2 it seems.
Iron ore prices for June 15, 2018: Prices have not updated today. Tianjin benchmark is at $66. I expect to see weakness when Dalian opens given the news flow on tariffs. In news, slow moving disputes herald more supply ahead. Samarco is plodding forward: After a year of back and forth, the owners of the idle
Iron ore prices for June 14, 2018: Tianjin benchmark was up 20 cents to $65. Paper was flat overnight. Steel is running. And is it any wonder with output like this: Inventories are reasonable so it has to be underlying demand. As I’ve noted recently with the big rebound in exports, I think OBOR-demand is
Iron ore price charts for June 13, 2018: Tianjin benchmark fell 15 cents to $65.80. Paper is running on the spot. Steel is strong again. Output for late-May at CISA mills pulled back to a slightly less astonishing 1.95mt per day. Iron ore spot appears to be decoupling with paper a little, not to mention
If you listened to the daily bleating of Australia’s parliamentary coal maniacs, you could be forgiven for concluding that the sector was on its last legs. Nothing could be further from the truth today as Australia is being flooded by coal cash at a rate that has not happened since the boom of 2008. The
Iron ore prices for June 12, 2018: Tianjin benchmark lifted 25 cents to $65.95. Paper was flat overnight. Steel is stalled. The Chinese stock draw down is slowing as noted yesterday: “As the low season for steel demand is approaching, price hikes at mainstream steel firms helped to stabilise market sentiment,” said analysts at Orient
Iron ore prices for July 6, 2018: Tianjin benchmark lifted 45 cents to $65.20. Paper was flat overnight. Steel is still trying but under the deluge of output can’t rally. CISA mid-May output was still astonishing if lower at 1.97mt per day. Reuters reports that: Chinese iron ore futures climbed to their highest level in
Iron ore prices for June 5, 2018: Tianjin benchmark rose 90 cents to $64.75. Paper was up overnight. Steel is firm still. Rebar inventories fell to 5.32mt last week, still falling at a good clip despite record output but still up materially on last year. The driver of gains comes from Reuters: Tangshan, the
Iron ore prices for June 4, 2018: Tianjin benchmark fell 85 cents to $63.85. Paper was up overnight. Steel flamed out. We’re running on the spot here. Except for inventories. China’s port stocks climbed to an all-time high last week of 161.98mt. That tells you that despite rampaging steel output, it is still the hoarding
Via the ABC: The Trump administration’s announcement it will impose tariffs on steel and aluminium imports from Europe, Mexico and Canada has drawn swift vows of retaliation from key allies, inflaming trade tensions and sending stock markets sinking. The administration’s move threatens to inflate prices for US consumers and companies and heighten uncertainty for businesses
Iron ore prices for May 31, 2018: Tianjin benchmark lifted 30 cents to $64.30. Paper lifted overnight. Coking coal is off to the races again. Steel prices are firm. CISA output for major mills reached an astonishing 2mt per day in mid-May. Literally off my chart. That this extraordinary output is transpiring in conjunction with
USB says so: A Green China is leading to a structural change to iron ore price discounts The environmental agenda in China, on the back of continued domestic growth, has had a material impact on the steel making industry in recent years. This is driving high productivity of steel mills, which will see margins remain
Iron ore prices for May 30, 2018: Tianjin benchmark eased up 74 cents to $64. Paper was up overnight. Steel is holding. One wonders if our mid-year price weakness is already over. We did have an unusually large draw down in April owing to trade war fears which boosted mills margins. Coking coal is still
Via the AFR: Solar battery farm developer Lyon Group is joining forces with JERA – a joint venture of the giant Japanese power utilities Tokyo Electric Power and Chubu Electric Power – and Siemens and AES Company’s Fluence partnership in a blockbuster alliance that aims to step up the rollout of grid batteries in the
Iron ore price charts for May 27, 2019: Tianjin benchmark fell $1.40 to $63.75. Paper was hit harder overnight. Rebar stocks drew down to 5.66mt, roughly 30% up year over year. All charts are sitting right on crucial uptrend or downside support. I think they’re going to break, perhaps this week. Meanwhile, World Steel is
Iron ore price for May 21, 2018: Tianjin benchmark fell -2.7% to $64.90. Paper held on overnight. Steel is falling. Rebar inventories fell again last week to 6.07mt and are roughly on par with last year now. Port iron ore stocks may finally be destocking. It all adds up to an overstocked market turning
Terrific new report from Platts on the iron ore “scraptastrophe”. Beijing’s visible hand: China’s demand for iron ore and scrap through 2020 The Chinese central government’s introduction of tougher environmental policies – including lower utilization rates over the 2017-2018 winter heating season – has brought new challenges of supply disruption and higher production costs. Ongoing
Iron price charts for May 18, 2018: Spot fell. Paper burned overnight. Steel broke Friday. The mid-year draw down has begun. Don’t tell anyone but it happens pretty much every year as summer rains disrupt Chinese construction and steel mills rebalance inventories going into EOFY. This year there is the added complication of the developing