Courtesy of ANZ. ANZ Commodity Daily 751 271112
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Commodities daily
Primary Section
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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Daily iron ore price update (squeezing FMG)
Here is today’s iron ore complex chart: And the ore chart: As well as steel chart: The restock and rebound is over for steel and iron ore seemingly. This may be seasonal, coming into the slower winter months, but the falls in the 12m swap speak volumes to me. This has been a very weak
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Rio is the last bull standing
By Leith van Onselen Earlier this month, Rio Tinto’s Chief Economist, Vivek Tulpule, told reporters that the firm believed that China’s economic growth would rebound and stay strong until 2020: Rio Tinto expects economic growth in China to rise to at least 8 percent in 2013 and average 8-9 percent to 2015, a more bullish
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Commodities daily
Courtesy of ANZ. ANZ Commodity Daily 750 261112
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Daily iron ore price update (ore vs FMG)
Here is Friday’s iron ore complex price table: And the chart: And Chinese steel: Rebar’s roll over does not bode well for short term prices. Neither do the key spread charts. First, ore to rebar in percent, which is too low: And ore to 12m swap is too high for the $120 price level: Definitely
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Commodities daily
Courtesy of ANZ. ANZ Commodity Daily 749 231112
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Daily iron ore price update (down she goes)
And down she goes. Where it stops nobody knows! And despite yesterday’s nice bounce in China’s Flash PMI too. I suspect there’s way to go down here. 5-10% is not out of the question based upon my spread charts, which both look stretched. Ore versus rebar: And spot versus swap:
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Commodities daily
Courtesy of ANZ: Reports suggest Chinese buyers had defaulted on three Australian thermal coal imports and some from South Africa, but are unlikely to spark a wave of cancellations (that we saw in May/June). We remain cautious – China’s domestic stockpiles at power plants are high and many traders in China could face tight liquidity
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Daily iron ore price update (TSIPIO62 Index)
A quiet day yesterday in the ore complex, although the 12m swap softening is not great. It looks well and truly stuck. No news today but it’s worth reiterating yesterday’s story in the AFR about China’s move to protect local ore miners: China is looking to halve the tax rate paid by its domestic iron
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Commodites daily
Courtesy of ANZ. ANZ Commodity Daily 747 211112
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China moves to protect its iron ore production
Missed this earlier. I have warned that the assumption by Australian miners, sell-side analysts and government – pretty much everybody – that the Chinese will lie down and let foreign imports displace local ore production is just a little naive. And now we have the proof. From the AFR (h/t NM): China is looking to
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Daily iron ore price update (roll over)
A poor day yesterday across the ore complex with falls in Chinese steel leading iron ore spot and swaps lower. Here’s the ore chart: And steel prices: As I’ve been warning for a week or so, all of my metrics are overstretched. Unless rebar bounces the rally is done. Interestingly, rebar is falling even as
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Daily iron ore price update (TSIPIO62 Index)
All quiet on the eastern front… Here is the chart I promised yesterday, the spread between the 12m swap and spot price expressed as a percentage of spot: Oh yeh, the rally is out of room, in fact, overshot already.
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CBA makes hay with the mining bust
Late yesterday, CBA produced a note with the combined resources of its economics, commodities, currency and equities teams that argued that: With commodity prices off recent highs a question is being asked is, “Is the resource boom over?” We put that question to CBA’s Economics, Currency,Commodity and Equities research teams. They conclude that the resource boom is a
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Traders push thermal coal rally
Courtesy of ANZ. Newc FOB physical thermal coal and Australia FOB coking coal prices firmed last week, with Asia demand showing signs of improvement for early next year loadings. Reports suggest traders were covering their short positions before closing their books or the year and ahead of Xstrata’s annual negotiations with Japanese utilities for thermal coal contracts starting in January. Reports
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Daily iron ore price update (the MRRT joke that keeps on giving)
Here is Friday’s iron ore price table: And the ore price chart: As well as Chinese coastal bulk shipping rates: It’s good news for thermal coal basically, which continues its nice rally on better Chinese electricity generation. For iron ore, the topping pressure is still there in our spreads. First, the 12m swap/spot spread looks
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Commodities daily
Courtesy of ANZ. ANZ Commodity Daily 744 161112
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Daily iron ore price update
Iron ore continued to edge higher yesterday, perhaps helped by the resolution of Chinese leadership: Not much more to say today but came across the following classic from Creamer’s Mining Weekly: While iron-ore prices appeared set to make a partial recovery, they would remain volatile, as revised Chinese growth targets and performance were likely to result
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Thermal and coking coal price rally persists
Courtesy of ANZ: Newc thermal coal futures posted stronger gains overnight. Now that China’s 18th National Congress leadership changeover has ended, we could see growth momentum pick-up. However, gains will be capped by excess Chinese coal inventories (sitting around 30 days of supply). Iron ore prices were flat around USD122/t, as China spot steel and rebar futures markets were subdued, but
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Daily iron ore price update (The battle of Roy Hill)
Here is today’s iron ore price table: Lot’s of news today. First, CISA reckons the rally is done: A recent rally in steel prices in China, the world’s top steel market, may lose steam as overcapacity continues to eat into steel makers’ margins, offsetting a recent drop in inventories, the China Iron & Steel Association
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Why the iron ore boom is done…
If you’re still wondering why I’m bearish iron ore in the medium term, here it is in a chart from the AFR’s ongoing (and very good, whoops!) mining conference blog: This is the locked in expansion plans of Rio and BHP. Combined with plateauing Chinese demand. That is BHP and Rio only. What do you
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Commodities daily
Courtesy of ANZ. ANZ Commodity Daily 742 141112
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Daily iron ore price update (running out of headroom)
Here is the iron ore price table for November 13th: Given neither steel prices not the 12m wants to budge, it’s worth revisiting the spreads we follow. First between the 12 month swap and spot: And between rebar and spot: And then the above chart expressed as a spread percentage: Now that’s what I call
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Commodities daily
Courtesy of ANZ. ANZ Commodity Daily 741 131112
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Daily iron ore price update (coking coal bounce)
Find above the ore complex price table for November 12. The news today is all in the other bulks, where we find a little bounce happening for both coals, coking and thermal, on improving Chinese data. From ANZ: Newc physical FOB thermal coal prices rose, in line with better China data. Electricity production in China rose
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Daily iron ore price update
Find above today’s iron ore complex table. Here are the charts. Spot and 12 month swap: The spread between them is running out of room for this price level: If you think about it, the spread makes a fair amount of sense. Current iron ore demand is boosted by restocking and Chinese leadership transition hopes.
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Commodities daily
Courtesy of ANZ ANZ Commodity Daily 739 091112
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RBA on steel and iron ore
This morning’s SoMP may have been a dead bore but there was one interesting breakout box about China’s steel market and iron ore demand. It keeps up the pretense of endless Chinese demand (which we can take with a grain of salt) but some of the details are useful. Enjoy. rba steel
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Daily iron ore price update
Find above today’s ore price complex table. In wider news, Reuters offered a good snap shot of the dynamics in the market overnight: “Most takers of cargoes are traders who are trying to keep the market up, expecting some good news for the steel sector to come out from the China congress,” said a Shanghai-based iron ore trader.
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Oakajee bites the dust
From the AFR: The future of the $6 billion Oakajee Port and Rail project in Western Australia has been cast into further doubt, with Japanese owner Mitsubishi to freeze spending and pare back its workforce on the troubled venture. Mitsubishi’s efforts to reinvigorate the project have been stymied by weakening iron ore prices, ongoing global