The RBA’s index of commodity prices for October is out and continues its recent dump. If you’re wondering why since iron ore has been powering it’s simple, longer term coal contracts are now getting lowered following falls earlier in the year: Preliminary estimates for October indicate that the index fell by 3.5 per cent (on a monthly
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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Today’s iron complex table is weak across the board. And, apparently, “analysts” agree that the rally is in peril! From Reuters: Iron ore prices may drop nearly 10 percent over the next three years as top consumer China’s economic growth shifts to a slower gear. …Iron ore is forecast to average $120 per tonne in 2013, down
More sideways action! And the big news of the day? BHP in full reverse gear: BHP Billiton has slashed more than 150 million tonnes of annual iron ore production from its Pilbara iron ore expansion plans in response to the recent price shock in the key steel-making raw material. The cuts are potentially worth $US18
Here is today’s iron ore price table: To the charts. Here is the iron ore price: Chinese steel: Thermal coal: Post inventories, which still show little signs of restocking: ANZ release a report Friday suggesting recent falls in the Baltic Dry may suggest the rally is topping for iron ore. The same message has been
Courtesy of ANZ: Iron ore prices improved slightly after China flash manufacturing data showed an improvement. However, thermal and coking coal markets continue to track sideways on weak China imports. China’s combined coal imports in Sep showed a 22% y/y decline to 14.9mt. Thermal coal imports declined 18%y/y to 12.4mt in Sep 2011, while coking
Here is today’s iron ore chart: Definitely looks like the spot market wants to test the $120 ceiling. 12 month swaps aren’t co-operating and the contango is gone but the spread has often been much wider than this so that may not hold spot back: As I’ve said, though, anything over $120 now has highly
All quiet on the Westoren front today. Not much else to read either beyond a bit bullish blather from UBS: Iron ore will probably advance this quarter to levels last seen in July as steelmakers in China, the biggest buyer, rebuild inventories on speculation that the country’s pace of economic growth will pick up, said
So, your table is below: A good day yesterday for iron ore but less so for its underpinnings. The news was not much better for steel with the release of the September figures for global steel production by the by the World Steel Association: World crude steel production for the 62 countries reporting to the
As you can see above from today’s iron ore complex price table, it was another lacklustre day’s trade on Friday. The ore chart now looks this way: Which we might describe as a loss of momentum. The steel chart is similar if marginally better: There’s clearly been an ore restocking impulse running through Chinese markets
Here’s your overnight ore complex action: Looks like the bulks got their Chinese data bounce one day early. In other news, I mentioned this yesterday but it’s worth repeating. Marius Kloppers has declared the end of the boom: In the 10 years or so that have passed since China first came to the fore as
Here is yesterday’s iron ore price table with a nice bounce across the complex on whatever trivia blew in: But that’s where the good news ends. HSBC yesterday released its quarterly commodities update and iron ore took a pounding, with forecast prices for 2013 falling 27% to $105. It is not a relief exactly, but
Business Spectator’s Ben Potter has a fast and loose take on iron ore today: Third quarter production reports have catapulted the big miners higher as they met or exceeded analyst expectations. This, combined with strong offshore leads and an investment community that is fast becoming less bearish on China provide a near perfect storm for
Another poor day for the ore price. More uncomfortable was that Chinese steel prices reversed. Though it was worse still for thermal coal. Here is the ore chart: And thermal coal explores the wrong side of the tracks: Here’s a longer term chart: That looks like another massive head shoulders pattern to me (and this
From ANZ today: Newcastle physical coal prices hit a 3-month low of USD80/t, in line with other Asian coal prices. Chinese demand remains soft and an oversupply situation is apparent in Pacific markets. The NDRC said Chinese utilities have closer to 29 days of supply (contrary to other reports of 20-25 days of supply). Either way, this is negative, with
I know this is getting boring but I can’t let the following pass without comment: The Australian and global economies got some good news over the weekend with Chinese trade data revealing a rebound in trade volumes. At the same time, officials at the People’s Bank of China said that China had a further fiscal
And so, big news for ore lovers over the weekend. First, here is Friday’s price table: Here is the ore chart: And the Chinese steel chart: No good news there. Indeed, the ore bounce appears to be over, for now anyway. According to Bloomberg, and as we know already, it was driven by speculation that end-user
As we know, iron ore has enjoyed a good bounce from its lows of almost 30%. Its steel partner, coking coal, however, has not. From ANZ today: Newcastle front-month coal futures declined 1.5% to USD85/t, as demand conditions remain soft. Richards Bay could get some traction from Indian buyers as end-users call for negotiations this week for Nov/Dec
Find today’s ore chart below: $120 suddenly looking pretty tough for ore and thermal coal has resumed its decline too. There is a lesson in thermal coal for all of the bulks as China shifts its energy paradigm and big thermal coal production expansions are hitting a fading growth engine. Expect the same for iron