The ferrous complex was smashed on August 4, 2022: Late July CISA output was out too and as expected we are free falling into the pit. There was some solace in inventories also falling 13%: GLJ Research points out the obvious: THE GLOBAL SEABORNE IRON ORE MARKET IS NOW IN SURPLUS: When looking at the
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 broke on August 3, 2022: The dream is over. We’re just waiting for the market to wake up: China’s steel industry is entering a precarious new era as a worsening property crisis imperils demand and Beijing’s construction-led growth model looks increasingly untenable. Almost a third of China’s steel mills could go into
The ferrous complex flamed out on August 1, 2022: For damn good reason. Check out the latest Chinese steel PMI: Judging from the steel industry PMI surveyed and released by the China Federation of Steel and Logistics Professional Committee, July 2022 is 33.0%, down 3.2 percentage points from the previous month, and the operation of
The ferrous complex was mixed on July 29: Once again, a mad night bid drove the price action in Dalian futures. I contend that this is Wall St speculators. There is not much reason to buy so furiously on the ground. MySteel indexes continue the roughly sideways pattern for demand and crash for supply: Iron
On occasion, one can’t help wondering what drives Davos Man. It sure isn’t loyalty to one’s nation or fellow man. Greed is the thing. There is no better example of this than RIO’s announcement yesterday that it has set the date for iron ore Judgement Day: Rio Tinto said on Thursday that its Guinea subsidiary
Ferrous markets were strong on July 26, 2022: It’s all a bit silly now. Steel is up 2% and iron ore 18% since the Chinese realty bailout fund news. This will only intensify the steel crisis in China and kill the rally in short order. Goldman has some ironies: The crisis engulfing China’s property sector
The ferrous complex was mixed on It was a genuinely stupid bounce in iron ore futures from a market that really has dragged its anchor in terms of fundamental analysis over the last two years as Dalian night trading has become the dominant price-setter. I suspect it is Wall Street loons that are to blame.
The ferrous complex was strong on Friday 22nd of July: Dalian futures went berserk on Friday night for this: A State Council meeting chaired by Premier Li Keqiang Thursday called on local governments to ensure construction and supply chains won’t be interrupted and that more job opportunities be provided to migrant workers, state broadcaster CCTV
The ferrous complex was weak on July 21, 2022: Some words from China’s largest steel mill are pointed: The world’s top steelmaker has added its voice to the growing sense of alarm among China’s mills over crisis conditions in the industry due to poor demand and plunging profits. China Baowu Steel Group warned of headwinds due to
The ferrous market was mostly weak on July 19, 2022: No spot price available today. CISA early July steel output numbers were out a few days ago and showed further deterioration: I expect a repeat of last year’s weak trend in H2 as Chinese property starts keep falling. More evidence can be found in excavators:
The ferrous complex was firm on July 18, 2022: I have no faith in this rally at all. Lower ahead. In news, there is this: China is planning a state-backed iron ore company to oversee everything from massive mine investments in West Africa to buying the steelmaking material from global suppliers, according to people familiar
The ferrous complex is warming into n historic crash now: Futures managed an overnight rebound but make no mistake this is not over by a long distance. The key chart is the ongoing collapse in property floor area starts with the projection from current sales: The ongoing attempt to offset this with infrastructure is failing
So predictable. All commodity cycles work this way: Rio in effect conceded on Friday that the cost of exporting iron ore from Western Australia this year would be about 5 per cent higher than previously expected. The rising cost was implied when Rio retained its promise to keep unit costs between $US19.50 and $US21 per
The ferrous complex was annihilated on July 14, 2022: The steel crash is leading us lower. Here is September Shanghai rebar: The Chinese property crash is intensifying as it sweeps toward banks. Steel demand is directly in its path. As the broader commodity mania implodes under Fed pressure, the bulk commodities are freed to fall
The ferrous complex was weak on July 16, 2022: I see no reason for the price to stop falling. Steel inventories are still far too high: Plus: Chinese property is buggered for the remainder of 2022. Infrastructure is nowhere near enough to offset it. A global trade shock is building. The Fed is not going
The ferrous complex was weak on July 8, 2022: There is nothing good going on in Chinese steel: China’s steel mills are sounding the alarm over crisis conditions in the industry as margins plunge due to weak demand. The starkest warning yet has come from Hunan Valin Iron & Steel Group, which met this week
Iron ore prices slumped alongside other commodity prices yesterday, to its lowest level for the calendar year as more COVID concerns in China amid further lockdown worries just after Shanghai pushed through a two month event. Interestingly though, Dalian futures had a wild ride in yesterday’s trade as the spot price pulled back, with other
The iron ore complex recovered with a 4% rise in spot prices, led by news that Brazil’s exports of the precious metal (sic) had taken a tumble, combined with another stoppage of the Simandou project in Guinea. Here are the latest prices: ING has the skinny on both Australian and Brazilian supply, as Chinese steel
The iron ore complex suffered another round of selling on Monday, with the impact of closed mills and increased shipments pushing inventory higher: Texture from Reuters: Chinese mills have idled dozens of blast furnaces as stocks piled up after domestic demand weakened, hit by covid-19 restrictions and bad weather. The rising prospect of
The ferrous complex was hit hard on July 1, 2022: The reasons is pretty simple. Chinese steel mills are out of room to store overproduced steel: In China’s biggest steelmaking province Hebei, local media reported that some mills had opted to implement an annual overhaul of furnaces earlier than usual, citing no more extra room
The ferrous complex faded on June 30, 2022: At issue was the Chinese PMI. The wider bounce did not translate to steel. Indeed, the Steel PMI was as bad as it gets: Judging from the steel industry PMI surveyed and released by the China Federation of Iron and Steel Logistics Professional Committee, in June 2022,
The ferrous complex cooled on June 29, 2022: As noted in recent days, we are seeing a jump in Chines property sales though it is very likely pent-up demand and there are seasonality issues with holiday timing: Now, some are seeing the bottom: The recent comments by Yu Liang, Chairman of property developer China Vanke
The ferrous complex surged on June 28, 2022: Enough good news out of China’s recent wins against COVID and lifting seasonal tailwinds were enough to trigger the rally. Seasonality can be especially powerful for iron ore so do not overlook that factor. Th next two months are typically very strong before we get crash into
The ferrous complex was mixed on June 27, 2022: Not very convincing price action there. Steel is still very soft. Iron ore selling has outstripped most other hard commodities in recent weeks so some sort of snap-back is normal. I have no hard view on whether we go immediately lower again. Seasonal trends are about