Find below the iron ore price table for May 14, 2013: Looks like we’re going to test $120. I’m still not overly bearish. All of that Chinese credit growth has to support something! In news today, the Australian Budget is slowly coming to terms with reality. From the AFR: It may be this year’s single
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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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I noted this morning that Indian sourced iron ore inventories at Chinese ports appear to rising again. There is further news flow suggesting India may be set to resume substantial exports by December. From the Business Standard: NEW DELHI (Reuters) – Goa expects court approval to resume by year-end the production and export of iron ore
Find below the iron ore price table for May 13, 2013: Rebar futures were up slightly. Chinese port stocks edged up again last week to 75.6 million tonnes. Indian source stocks rose again also, up to 18 million tonnes. Whatever the cause, some Indian iron ore appears to be seeping back into the market.
Find below the iron ore price table from May 10, 2013: Not much movement, clearly. Last week I didn’t bother reporting on BHP statements that it expects iron ore to fall. After all these were not new. But some new detail of the giant’s comments is available and is interesting: BHP on Wednesday confirmed
Jeez. What a dreadful state the AFR is in. Its iron ore coverage today is as ignominious as it is wrong. First up, the obsequious “Boss” magazine, whose primary role is to myth-make around CEOs as Nietzschean ubermensch, does a spectacular lipstick job under the title of “How Nev Power saved Fortescue”: NEV POWER should have
Find below the iron ore price table for May 9, 2013: Rebar futures were down slightly. In news, the WSJ reports that Indian iron ore will remain offline for the foreseeable future: India was once the primary source of spot-market iron ore for China, the world’s largest consumer. But its share started to decline 18
From the AFR comes news that London fund managers are pressuring Rio: The so-called “360” project entails the approval of up to $US5 billion of spending on new mines needed to match port and rail capacity improvements that have already been approved. It would lift Rio’s annual production by 70 million tonnes from the 290 million tonne capacity
Find below the iron ore price table for May 8, 2103:
Find below the iron ore price table for May 6, 2013: And the charts. For spot: 12 month swaps: So, we have a bounce but it so far failed to undo the technical damage to charts enough to conclude last week’s plunge was a false break. Rebar average: And rebar futures: It looks to me
Find below the iron ore price table for May 3, 2013:
Find below the China steel PMI for April courtesy of Bloomberg: After the wild fluctuations of the past few months, stability certainly suggests that restocking cycles are done. However, there is nothing terribly exciting in the figures. Output, new orders, new export export orders are all still falling. In better news, inventories have started to
Find below the iron ore table for April 30, 2013: And the charts. For spot: 12 month swaps: Rebar average: And rebar futures: Slow trade can probably be put down to May Day holidays. Today’s interesting news is that CISA has issued a plea to Chinese steel makers to…err…stop making steel: Thankfully for Australia the
Find below the iron ore price table for April 30, 2013:
Find below the iron ore price table for April 29, 2013:
The Pascometer seeks out a cheap headline today with some late-to-the-party megabearishness on iron ore: The more bearish iron ore analysts have another voice in their chorus warning about price falls – the China Iron and Steel Association. If they’re right, there are ramifications for the federal budget, as well as the viability of some
Find below the iron ore price table for April 26, 2103: Historic spreads between between iron ore and its sundry prices suggest a spot price in the mid to high $120s. That’s maybe where we are going, though there’s a possible head and shoulders pattern forming but again I wouldn’t get too bearish unless swaps
Find below the iron ore price table for April 23, 2013: Basically the support cast to iron ore prices are signalling further weakness but I wouldn’t conclude yet that a bigger move is on unless swaps breaks to new lows. Last week’s Chinese port inventory data is also out and was more supportive as it continues
Below find the iron ore price table for April 22, 2103: A mixed day then but worth noting that the spreads between spot and swap is now at least $10 wider than historic relationships suggest it should be. And the spread to rebar is still at unprecedented levels. It is perhaps no wonder then that China
Find below the iron ore price table for Friday April 19, 2013: Obviously the rebar charts are not signalling a healthy Chinese steel market, at all. Not that that stopped FMG CEO Nev Power from spruiking like mad on the weekend with the help of Alan Kohler: ALAN KOHLER: And the iron ore spot price hasn’t
Find below the iron ore price table for April 17, 2013 (sorry it’s late, data issues): Looks like real underlying demand is pretty solid but markets are pricing for the future of oversupply. News today confirms it, Altas Iron boss Ken Brinsden gives it to the bears: Mr Brinsden said the investment community’s view on the
In the past two days, Rio Tinto and BHP have both confirmed full year iron ore production guidance. From the AFR yesterday: In iron ore, Rio reported a 7 per cent fall in production from its flagship Pilbara operations to 57.8 million tonnes in the first quarter, compared to the December quarter, as a result of
Find below the iron ore price table for April 16, 2013:
Find below the iron ore price table for April 15, 2013: So, the miracle commodity keeps its head when all around it lose theirs. That’s real gold for ya! Several reasons might be posited: Chinese growth was not so bad yesterday and credit suggests Q2 will be better market internals with some restocking action after
Find below the iron ore price table for April 12, 2013:
Find below the iron ore price table for APRIL 11, 2013: In news, from the World Steel Association via Fox, the iron ore glut is official: Excess supply will arise as 250 million metric tons of new iron-ore capacity is due on stream over the next few years, Edwin Basson, World Steel’s director general, told reporters.