Has China buckled on Aussie coal? There are some signs that it has done so: Australian miners are increasingly optimistic they may be able to resume selling coal to China, after official data confirmed small volumes of Australian coal cleared the Asian superpower’s borders in October. China imported 2.78 million tonnes of Australian coal in
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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The ferrous complex was hit on Friday 26th of November as the relief rally stalled then got infected with NU. Futures and steel were hammered: The latest drip of data is all bad. Mysteel’s weekly indexes are crap: Mid-November CISA output was terrible: Capital Economics is forcing me to review my assessment of the usefulness
The ferrous complex remained bonkers on November 24, 2021 as spot popped the ton, paper calmed overnight and steel took off: Some of this is obviously the massively overblown hype around Chinese stimulus. But, equally important is probably the return of the energy crisis. Coking coal futures are continuing to fall: But, thermal coal has
The ferrous complex was strong on November 22, 2021 as spot jumped with paper but steel fell back: There’s much excitement about more Chinese stimulus but that’s just the usual Pavlovian dogs. At this juncture, there is nothing coming that fundamentally alters the oversupply of iron ore. What matters more is thermal coal prices. They
Everything ferous launched on Friday, November 19. 2021 on a rumour of more stimulus: There is nothing to report beyond reports of a rumour so this just looks like more technical action. Mysteel’s weekly gauges of activity look no better than last week: My outlook is unchanged. $50 iron ore sooner rather than later.
More on the declining fortunes of Australia’s iron ore billionaires today. Gina Rinehart is basking in the glow of the last great iron ore boom: Roy Hill, in Western Australia’s Pilbara region and majority-owned by Mrs Rinehart’s Hancock Prospecting, on Friday will announce a $4.4bn net profit for the year to June 30, double the
The ferrous complex was weak on November 18, 2022 as spot, paper and steel fell: Seaborne coking coal futures have now joined the broadening ferrous crash: Readers will know that my base case is ongoing heavy price falls in everything ferrous as China resumes its shuttered 120mt of EAF steel production that was suspended owing
The ferrous complex was stalled on November 17, 2021 a spot and aper eased and steel firmed: Not much in news today. The coking coal price joke is ebbing away: The crucial thermal coal price which has supported both coking coal and iron ore demand by removing 120mt of EAF steel output is still falling
The ferrous complex was soft on November 15, 2021 as spot eased, paper firmed overnight and steel has not updated: The market continues to smoke crack. Chinese steel is an outright disaster: The pipeline ahead is even worse: And there is only one thing standing between iron ore and catastrophe. That is the thermal coal
The ferrous complex was hammered November 12, 2021 as spot and steel tumbled and paper held on overnight: Port inventories were up another 3mt plus last week to 150mt: Output adjusted, inventories are at a record high already. Steel is still at the brink and, most importantly, Chinese average daily coal production hit 12.05mt in
The ferrous complex popped on November 11, 2021 with spot and steel but paper flamed out overnight: The market is trying to get excited by yesterday’s wave of policy rumours. But, the truth is, they are policy calibration not a swing to broad stimulus so the downside case for Chinese construction is intact if marginally
The ferrous complex was pretty wild on November 10, 2021 as spot tumbled but steel surged and paper gained overnight: Here it is in black and white from Wall Street’s Goldman Sachs: 2021 has been a year of change in China, with policymakers continuing normalizing macro policies and introducing regulatory measures in numerous sectors. While
The ferrous complex hung on for grim death on November 8, 2021 as spot firmed, paper was hit overnight and steel fell: CISA released its late October output numbers for major steel mills and it was, again, unbelievably bad, down nearly 8%: The year-on-year collapse is roughly 160mt per annum. From the peak it is
The ferrous complex was weak on November 4, 2021 as paper fell more overnight and steel is in meltdown. Benchmark spot didn’t trade owing to a Singapore holiday: Steel is in meltdown: I see nothing to stop this. Chinese demand is falling faster than mills can cut output. There’s 120mt of EAF yet to return.
The ABS has just released trade data for September, which posted a $2.5 billion decline in Australia’s trade surplus on falling iron ore prices: Goods and services credits (exports) fell $3,081 million (6%) to $44,969 million: Whereas goods and services debits (imports) fell $586 million (2%) to $32,725 million driven by continued global supply chain
The ferrous complex was all over the place on November 3, 2021 as spot firmed, paper was whacked overnight and steel fell: Thermal coal futures took off in a dead cat bounce yesterday that lifted the ferrous complex. Even so, Shanghai rebar is still falling: And seaborne coking coal is still running its own race
The ferrous complex was flushed away on November 3, 2021 as spot, paper and steel all crashed. There was a little repair for futures overnight: The trigger was Chinese port stocks which piled on another 4mt to 146.5mt last week: The port inventories to steel output ratio is back at record highs: Rising inventories means
The ferrous complex was very weak on November 1, 2021 as spot tumbled, paper fell more overnight and steel crashed: It’s being led by the evisceration of thermal coal which will in due course promote the resumption of 120mt of suspended EAF production in China and foist that adjustment onto BOF instead: This will mean
The China steel PMI is now in rare territory: The full script is below: Judging from the steel industry PMI surveyed and released by the China IOT Iron and Steel Logistics Professional Committee, it was 38.3% in October, a decrease of 6.7 percentage points from the previous month. The steel industry is operating tightly. The sub-indices
The ferrous complex was mixed on October 29, 2021 as spot was hammered, paper stabilised overnight and steel lifted: Steel (rebar) is clinging to technical support: There are rumours of even more steel shutdowns but the more important factor on that front is the imminent reopening of 120mt of shuttered EAF steel output. The reopening
Iron ore and coking coal were trying to rally this morning before a stern word from the NDRC declared that prices have further to fall and remain far above production costs. Ain’t that the truth: Indeed they are. FAR below. Dalian coking coal: And iron ore: RIO is in free fall. For some unknown reason,
The ferrous complex was pretty wild on October 28, 2022 as spot tumbled, paper fell more and steel crashed before finally catching a bid: Coking coal was eviscerated again but, finally, put a bid in overnight: We may (or may not, these markets are crazy) be through the worst of the crash for now. But,
The coal bubble is bursting like a fat, overcooked sausage. China triggered a rout yesterday with the news that the hoarders are to be beheaded: China’s thermal coal futures slumped to their lowest in more than a month on Wednesday, marking a sixth consecutive day of declines, after the country’s state planner said it would