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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Little to go on yesterday with many markets still in holiday mode but the 12month swap rallied handsomely: The only other data point of significance was Port Hedland shipping volumes for September which showed a sharp drop: It’s looking a bit toppy but not enough to draw any conclusion. I wondering if the RBA has
Yesterday’s iron ore prices showed more stability: ANZ also produced one of its semi-regular special reports and, although it has cut its forecasts for 2013 and beyond, remains attached to the iron ore price floor theory in the longer term. It’s worth a read for its assessment of how grim things are currently in Chinese
A sub-component of China’s official PMI is the steel PMI. It offers us a useful glance of activity within the steel sector in particular. Like the broader PMI, conditions deteriorated less quickly in September with the headline result a sub-par 43.5 but well up from August’s 39.9: Moreover, new orders and new export orders both
Find yesterday’s steel complex prices above. There are a couple of interesting bits around on the iron ore price today. The first is from Alphaville on ye auld price floor: The cost curve theory is that the highest cost producers (who happen to also be in China) will drop out when iron ore prices fall below
From the AFR: Chinese steel production will fall over the next three years, according to figures released at a major iron ore conference on Thursday. The Deputy Secretary-General of the Metallurgical Mines Association of China, Liu Xiaoliang, forecast that by 2015 China would demand only 705 million tonnes of crude steel. That is a fall
Yesterday’s iron ore prices show more stability: The rally in steel prices is reassuring but it looks like more pressure ahead for thermal coal. There is a quote today from Mark Pervan of ANZ in the SMH about the longer term price for iron ore: The head of ANZ’s commodities research, Mark Pervan, said the
Courtesy of ANZ: Newcastle front month futures prices declined to USD87.2/t dragged lower by negative demand sentiment for energy related assets. Iron ore did not fare much better, falling 2.5% to USD103.7/t, while Australia FOB coking coal prices also declined by USD1.42 to UDS146.79. Slower steel demand growth in China and Europe has created a surplus in Asia, weighing on prices.
Remember Baosteel, which had a new steel project approved by the government, and the construction of the new plant started, then stopped? The reality that the steel industry has a little problem of overcapacity is no secret. With absurdly low profit margins as the slowing economy combines with high financial leverage. A few years ago, Baosteel acquired a plant at Loujing
Another wild day for the iron ore market with 12m swaps reversing spectacularly, spot showing less trouble and Chinese steel prices firming up. So long as the rally in Chinese steel prices persists so too will the ore price. And on that front, the World Steel Association released its August figures today: Brussels, 20 September
Courtesy of ANZ. Newcastle FOB October coal prices improved slightly to USD91.8/t. BHP Billiton boosted thermal coal production in its 2012 financial year, with record high output at two of its thermal coal mines in Australia and Colombia. BHP’s coking coal data was more bearish, with a large fall in earnings at its coking coal operations in 2012 due to
While we seem to have passed the short term nadir for iron ore prices, coking coal is still taking a battering. From ANZ: Newcastle FOB physical coal prices were steady around USD91.1/t. Thermal coal markets appears to have based and may find slightly better support as we enter the seasonally strong winter demand period. We
From the AFR: Fortescue Metals Group has secured a commitment for a new debt facility of up to $US4.5 billion underwritten by Credit Suisse and JPMorgan that it will use to refinance its existing facilities and provide it with additional liquidity. …Fortescue said the earliest repayment date for any of its debt is now November
Whilst I spent Friday with most folks thinking QE3 would have a limited impact on iron ore, so far we’re all wrong. The Fed launched ore into another spectacular bounce: Which, as you can see, did absolutely nothing for Chinese steel prices: I have absolutely no idea what comes next in these crazy markets but