The ferrous complex crashed yesterday after an insane week of gains: The spot market was closed owing to a Singapore holiday but paper tells the tale. Rebar was belted as well. Is the peak in? I have no idea. This is now purely a sentiment-driven market. China waved its hands frantically yesterday: China will monitor
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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Yesterday Australia received some very, very big news. It wasn’t reported because it’s pretty scary. Goldman summed it up nicely: NBS released the key results of the 7th population census today. Overall population in China reached 1.412 billion in 2020, an average growth rate of 0.53% yoy from 2010 to 2020; in comparison with the
Commodity prices are a bubble and the pin is closing in fast. China released credit data for April overnight the slowdown is outpacing even my expectations. China has yanked a credit handbrake. Total social financing came in at 1.85tr yuan within which bank credit made up 1.47tr This is down 38.5% year on year, the
The ferrous complex calmed down a little yesterday after Chinese regulatory intervention but oftentimes it takes more than one hammer to hit the iron ore nail so expect further moves. Spot eased. Paper firmed overnight. Steel waltzed straight through: In data new, Brazilian April exports were soft as expected, up only 7.5% over the year.
The ferrous complex has shot clear of Planet Earth with spot losing its anchor. Paper was limit up plus all day yesterday but got hammered 5% last night as Chinese regulators dropped the jackboot on Dalian margin requirements. Steel is mad (note the table has several days of gains): Gone is any concern for the
Australia’s China divorce hits another milestone today. Following recent Morrison Government warmongering and ripping up VIC’s BRI deal, the blowback has arrived as the next commodity to be targeted is LNG: Two Chinese importers have been told to avoid Aussie LNG. China imported 29mt in 2020. About 10mt of that is above contract obligations. Recall
The entire ferrous complex is now in an advanced state of hysteria, both greed and fear. Everything is tearing the roof off (though steel did not update): The underlying market is not tight enough to rationalise this. Steel output is very strong but entering several weak demand months in China. Iron ore supply is fine
Iron ore is off and running with spot above $200, paper still going higher overnight and steel out of control: How high we get now is anybody’s guess. Post-Q1 seasonal supply is yet to rebound: It should roar higher than 2020 in short order. Just as Chinese seasonal weakness hits in May/June owing to southern
Recent Morrison Government warmongering took a breather yesterday after the CCP struck back by suspending the China-Australia Strategic Economic Dialogue. Frankly, the dialogue has been dead for four years anyway so this rather suggests that Beijing has run out of levers to pull. Ahead, Australia will likely cancel Andrew Robb’s treasonous Darwin port deal as
Iron ore spot prices jumped again overnight, up $3.05 to $192.70. Platts has more bullishness today: Iron ore prices have risen to record highs in recent weeks, largely because supply has not been able to keep pace with demand in China, where crude steel production has grown by 30% over the past five years. Unless
Most markets are closed in China but iron ore spot is trading, up $3.20 to $189.65. In news, it’s all about scrap, via Platts: Ferrous scrap has decoupled from stronger iron ore prices so far in 2021, as low coking coal costs and strong steel demand in China and elsewhere support iron ore consumption at
The ferrous complex cooled off Friday April 30, 2021 with spot down, paper down more but steel firm: We are into the May seasonal price falls now. Expect a 10% correction or so before we rebound through later June for a few months. However, the larger cyclical slowdown is also coming. Last week’s PMIs gave
by Chris Becker The iron ore complex took a bit of a breather yesterday as spot prices were unchanged while Dalian futures pulled back, rebar continues to rise as demand for steel in China reaches new highs: Meanwhile its a continued boon for Australia with iron ore exports underpinning the post-COVID recovery, and in fact
by Chris Becker Spot iron ore retreated ever so slightly yesterday from its record high but still above $190 per ton while futures settled down from their recent frothy highs, but its sure to be short term: With another record trade surplus, exports of iron ore have been booming with over $14 billion launched overseas
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. Demand continues to drive price, according to S&P Global Platts: “What we are witnessing is the
by Chris Becker More new highs for the iron ore complex yesterday as “structural contradiction of supplies and a shortage in medium and high-grade products” continue to elevate the primary product to ever new levels. Here’s the price table: And charts: Texture from Reuters as this commodity supercycle keeps benefiting from the “brrr” of the
The ferrous complex went nuts on Friday 23 April, 2021 with spot higher, paper flying and steel powering on: CISA mid-April steel output was still crazy: China efforts to sit on the market have completely backfired now. All output curtailments have done to skyrocket prices and margins and raw materials are now following. They never
Treasurer Josh Frydenberg is on the hustings lording it over China today. Following yesterday’s righteous cancellation of VIC sub-national deals with the BRI, he appeared to fear no reprisal: There will be no disruption to iron ore flows. China needs the iron ore and China will keep buying it This is the base case. But
The ferrous complex went nuts yesterday, hitting the highest prices since 2011. Spot launched. Paper faded overnight. Steel firmed: Yesterday’s major miner reports were actually pretty good so I’ll up this down to the general tumbling USD and revived risk bid. Vale is bringing back the volumes. The only question I have is why its
Vale is out with its Q1 production report. Vale’s iron ore fines production totaled 68.0 Mt in 1Q21, 14.2% higher than in 1Q20, as Vale progressed on its operational stabilization and resumption plan. The year on year growth is attributed to: (i) the gradual resumption of halted operations in Timbopeba, Fábrica and Vargem Grande complexes
The ferrous complex soared to new highs again yesterday with spot charging, paper up more overnight but steel sagging: There is doubtless strong demand driving this. And, who knows, perhaps we’ll take another shot at $200. As well, the falling USD is arcing up all commodities again. And, as said many times, April is a
Some very important articles today point to the sticky wicket that Australia’s huge iron ore trade is now playing on. The first is Richard McGregor from the Lowy Institute: Chinese leaders have long probed Australian counterparts about what they would do to iron ore supply if it came to war with Taiwan. Australia lived to
The ferrous complex was mixed overnight but it is once again party time for iron ore as strong seasonals combine with a falling DXY to deliver a surge in prices. Spot roared. Paper too. Steel fell: CISA early April production data was out was firm: It appears we might give new post-2011 high prices a
Yesterday the ferrous complex was mixed as spot eased, paper lifted and steel fell: The headwaters of iron ore demand are increasingly ruffled. The crunch in China Huarong bonds got worse with some bonds trading at 80 cents on the dollar and 2022 issuance trading at a yield of 35%. Moreover, there’s an awakening underway
One of the less well-understood dimensions of Chinese economic restructuring is the travails of its corporate bond market. For a few years now, authorities have been slowly removing the moral hazard that has dominated Chinese debt markets through its development phase. This causes periodic panics in financial markets but it should not. This is an
The ferrous complex resumed normal programming yesterday after Monday’s whacko action. Iron ore spot fell. Paper eased. Steel launched to new highs: That makes a lot more sense than action the day before given Li Keqiang’s statements. China continues to suck in lots of ore, importing 102.11mt in March: That was up bigly from a