JPM has a look fundie mining holdings today: The run in iron ore over the last year, buttressed by rising Chinese demand, drove a significant rally in the Mining sector. Since Jul-20, the price of iron ore has risen from $112/t to$176/t. The Australian Miners have outperformed by 229bp over the same period. Alongside this
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 fell on March 5, 2021 along with the broader ferrous complex. The global market rebound did nothing to restore it: Yet signals are still bullish. CISA output is completely insane: Yet the Luna New Year inventory rebuild is pretty modest: I would normally say that this is all bullish. But, mill margins are
Iron ore prices firmed overnight as the ferrous complex warmed into global reflation. Steel prices surged giving steel mills some margin but they will need to keep raw materials purchases contained or it will all be gobbled up by the miners: The steel surge is global as demand is clearly outstripping supply for now. China
Iron ore prices for February 2, 2021 saw Tianjin spot rise alongside Chinese steel markets. Overnight Dalian futures fell: Chinese port stocks of iron ore are rising again: I would normally see the rise in Chinese iron ore inventories as bullish for prices. It probably is for a few months yet. But, with steel profits
Iron ore prices for March 1st, 2020 fell across the complex as weak Chinese PMIs weighed: The steel PMI was out and rebounded: New orders are clearly trending down despite a better month. Steel Orbis has more: I still expect strong pricing for a few more months. But remember that the Chinese credit impulse peaked
It was a good time if not a long time. Nordea: Markets almost never cease to amaze. Just as we had written at ext pondering the doomsday spiral between commodity prices and inflation fears, the fixed income market got spooked enough so as to start triggering unwinds of various reflation trades. When the US10y yield
Iron ore prices for February 26, 2021 finished at decade highs: Indeed the entire ferrous complex is at new highs with steel and futures up again overnight and despite the global ructions in bond markets. Expect strong pricing to continue for two months. For a bit of fun, I have redone the very long terms
Iron ore prices rallied yesterday and more particularly steel prices. Paper followed overnight: This appears to have been a delayed reaction to yesterday’s news of steel cuts in Tangshan which, as I noted, usually sends the ferrous complex higher. Any widening of steel mill margins is bullishh for iron ore. Good news is now good
Iron ore prices traded flat yesterday. Paper markets were soft overnight. Rebar did better: Yesterday CISA released mid-Feb output data for major mills and it hit preposterous levels: This is a part of the early year build of steel inventory and will come down before long. Even so, it is clearly bullish for now. Even
The post-pandemic environment is deeply irrational. We’ve seen markets crash down and crash up. Autocracies charge into self-defeating abuse of all and sundry. Democracies give up entirely upon accountability. Riots at the Capitol. The “great reset” conspiracy theory. The normalisation of rape in the Australian Parliament House. Entire countries swept by death while others bunker
Late yesterday China released its 70-city house price index and it showed some refirming of prices for January with month-on-month prices at 0.3% and year-on-year at 3.9%: The number of cities registering gains swung back to positive with 40 versus 30 stable of falling: The price gains are still very much in lower-tier cities: There
Iron ore prices fell yesterday, February 24, 2021: The proximate trigger was the tightening of output restrictions in Tangshan as pollution levels surpassed healthy levels. In the past, these types of restrictions have proven bullish for iron ore if they triggered a rise in steel prices but we seem to be so over-heated here, with
Iron ore prices were firm overnight as paper rebounded with steel and dirt yesterday: The latest update for steel output levels in China via CISA are insane at 2.15mt per day: I expect output to fall as the year wears on, much like 2011, as China steadily applies the stimulus brakes. In a supply-constrained environment,
Friday night saw the Australian dollar roar higher virtually by itself. It was aided by a weak US dollar but that doesn’t fully explain it. Risk was generally muted and other currencies did not move anywhere so aggressively. Why? Wall Street bulls are still talking up the AUD despite rising US inflation and yields. Via
As expected, and as usually happens, following Chinese New Year, steel mills returned refreshed and ready to buy. That said, it’s not always quite so tearaway with everything going bonkers the moment markets reopened. We spent most of the day at or near limit up: I expect firm prices through iron ore markets through the
The recent Chinese trade war on itself via Australia has contributed to tremendous rises in the iron ore price. If it needed any further convincing, this has tipped the scale for the CCP’s long-held dream of creating a substantial African iron ore alternative.Departing Glencore chief executive Ivan Glasenberg, who knows a thing or two about
Yesterday we got a little shock from Fortescue. It came in the form of the resignation of three key executives associated with its Iron Bridge expansion: OK then. Not much to add. I can only observe that the focus on culture and behaviour seems a little out of step with the cost overrun crisis. There
I remain skeptical about the suddenly very fashionable commodities super-cycle thesis. Even more so as others lose their heads. Such as Chanticleer after yesterday’s BHP release: Mike Henry is a cautious type. [His] “fundamentally positive” outlook that could last as long as 30 years. He says two key drivers will underpin demand. The first is
Via Glynn Lawcock at UBS: ONE LINER NPAT miss but higher dividend a positive. KEY NUMBERS Underlying EBITDA of US$14,680m (+21% y/y) vs UBSe US$15,361m (Vuma cons US$14,689m). Underlying NPAT of US$6,036m (+16% y/y) vs UBSe US$6,640m (Vuma cons US$6,331m). Underlying EPS of US119.4cps (+16% y/y) vs UBSe US131cps (Vuma cons US125cps). DPS of US101.0cps
Readers will know that the MB view is that the stronger this year’s global recovery, the quicker that China will tighten its most recent credit binge as its export sector booms. That clamping is already underway. The reason why is well known and understood. In its formative stages, super-charged catch-up growth in a developing economy
Global Mining Research has a nice primer on the emergence of green steel. Green Steel – Why is it relevant? The production of steel is one of the most polluting industries from a CO2 perspective, representing in the order of 8% of global emissions. For the miners ESG reporting has never been as relevant and for
Iron ore prices for February 9, 2020: Everything up again. Have I made my sell the rallies call too early? Reuters reports that ex-China demand is rebounding: But, as Chinese credit shows today, the slowdown in China is being baked in now. It won’t arrive until H2 but it’s coming: As well, Chinese steel mills
Iron ore prices for February 8, 2020: Everything up. The AFR muses on China’s greening: Macquarie has modelled a scenario where China’s 7.7 per cent year-on-year production growth in December is sustained in the first quarter of 2021, then a trend slowdown of 1.5 per cent month on month takes hold through to the end
Via Westpac’s excellent Robert Rennie: Back in November we introduced a simple iron ore port inventory model (specifically an inventory deviation model – see “Negative iron ore supply shocks waning“) that could be used as a useful indicator to point to where iron ore prices might settle down to if we saw signs that the
Iron ore prices for February 4, 2020: Spot and paper flew. Steel has not updated. CISA output for the last 10 days of January remains outrageous. In news, Vale’s Q4 production report was encouraging for supply: Vale’s iron ore fines production totalled 300.4 Mt in 2020, in line with 2019 as a result of (i)