Gina’s AFR continues to pour forth rumours of progress for the big Roy Hill iron ore mine: Export credit agencies including Export Import Bank of Korea (KEXIM), Japan Bank for International Co-operation (JBIC) and Nippon Export & Investment Insurance (NEXI) had been pressuring Roy Hill shareholders led by Rinehart’s Hancock Prospecting to fully guarantee that
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.
Also Check – Australian Dollar
Find below our daily feed of market analysis
The AFR’s Chanticleer column is ducking and weaving its way around a few potholes (or falling in them) in its iron ore coverage this week. Recently we heard from the premier column that: At a time when the resources sector is beset with an endless flow of bad news, it is impressive that Gina Rinehart’s
I’ve obviously been following the coking coal price slide closely. Three weeks ago BHP announced a new quarterly contract at $145. Wesfarmers is out today with a new one $5 lower: Compared with a free-on-board price of $US167 per tonne from April to June, a price of $US140 a tonne from is expected from July
From BS: BHP Billiton Ltd has missed its full-year iron ore production guidance, despite posting a strong lift in fourth-quarter activities. In the three months to June 30, BHP’s iron ore output was 47.689 million tonnes, a 17.7 per cent lift on 40.891 million tonnes in the previous corresponding period. Year-to-date iron ore production came
Find below the iron ore price table for July 16, 2013: My doubts about reaching $130, or staying above it, remain. But we’re still marching along quite comfortably, fueled by the rebound steel prices (such as it is). Today’s news is dour as usual. From the China Daily: Iron ore producers and traders face a weak market with falling prices, and analysts believe these conditions will persist through the third quarter. During the first four months of the year, about 2.13 million metric tons of iron ore wereunloaded at Qinhuangdao port, a major commodity trading port that is seen as an economic bellwether. The volume was basically flat compared with the same period of last year, according toGeneral Cargo Branch Co, which handles the port’s iron ore business. The company declined to release more recent data. But visitors to the port can easilysee that unloading facilities are idle. And workers have observed a slowdown, too. A 40-something man who declined to give his name, who said he has worked in the port
Rio’s Q2 production report is out and there’s no stopping the iron ore deluge. Rio confirmed its guidance for 2013 at 265 tonnes: Record first half iron or production, shipments and rail volumes despite conveyor belt breakage resulting in one of five ship loaders being side-lined for almost three weeks in and unseasonal wet weather
From Reuters: Glencore Xstrata Plc said it will halt production of iron ore in Australia next month, citing deteriorating market conditions and ending a two-year experiment to gain a toehold in the sector. The company has been producing 1 million tonnes of iron ore concentrate a year for Asian customers as a by-product from its Ernest Henry copper mine
From ANZ: Iron ore prices rose to a 2-month high of USD126.9/t, but upward momentum appears to have waned. Market reports are mixed, with some suggesting steel mills are operating on low levels of iron ore inventories and are replenishing stocks on strong steel production – however, others suggest bids for cargoes remained low, with
From Deutsche comes a couple of handy production report previews for BHP and Rio: RIO: 2Q13 Prodn preview – Rio is set to release its 2Q13 operating results today at 3pm. We expect the Pilbara mines and rail to be operating above capacity, and we forecast an 8% increase in production to 62.5Mt. Also, with the 6th car
Find below the iron ore price table for July 15, 2013: An interesting story from India today: India’s iron ore imports plunged 78 percent in the April to June quarter from a year earlier, according to provisional data from government sources, as domestic supply rose and exports fell. The shipment data, coupled with a 9.1
The coming iron ore glut got some bad news today. From the Gina’s Chanticleer: At a time when the resources sector is beset with an endless flow of bad news, it is impressive that Gina Rinehart’s Hancock Prospecting is powering ahead towards completing $7 billion in funding for the Roy Hill iron ore mine. Rinehart is
ANZ is one of the more bullish commodity houses but today it turns bearish in a new note and downgrades its price forecasts. It sees the big picture this way: Although liquidity tightness in China has started to ease, funding costs are unlikely to return to normal levels any time soon. If China’s central bank
Find below the iron ore price table for July 10, 2013: Rebar futures rose. In technical market terms I would have thought more strength lay ahead. But the flow of macro data should probably stall the rally here and those thinking about taking a short position for Q3 should certainly be building positions.
From ANZ: Bulk commodities showed mixed performances. Thermal coal markets declined 1.2%, but prices in the physical Newc market were unchanged, despite a continuing bearish market outlook. The IMF downgraded China’s growth forecast to 7.8% this year and 7.7% in 2014, down from its earlier estimates of 8.1% and 8.3% in April. Encouragingly, other energy
Find above an interesting segment aired last night on ABC’s The Business on the sharp slowdown currently underway in the Queensland coal industry, which has experienced large job losses and significant cutbacks in mining investment following steep falls in coking coal prices. Below is the transcript from the video. The Full HD version can be
A comment from the Mac Bank commodities team is of interest today (sorry, been a bit slow on this story): On Wednesday, Vale received the environmental installation licence for the 90mtpa Carajas S11D project. This follows on from licences received for port and railway construction earlier in the year, and has thus allowed Vale’s directors
Find below the iron ore price table for July 8, 2103: The rally continues but is looking a bit tired: Although, rebar is trying to get off the bottom: Our spot/swap spread chart has a little more room to move: But spot/rebar remains over-stretched (even with what might be a bottom): Rebar futures also bounced.
From the ANZ today: Rallying oil markets potentially supported sentiment for thermal coal, but firmer physical iron ore prices were likely driven by strength in paper markets. Iron ore swaps (IOS) andShanghai rebar futures posted another day of gains across the curve. However, we think near-term gains could be short-lived, with Baltic capesize freight rate declining
Find below the iron ore price table for July 1, 2013: Rebar futures were also flat. In news, BHP has announced accelerated automation in the Pilbara: BHP Billiton is speeding up the modernisation of its Pilbara iron ore division, with efforts to reduce spending on contractors coinciding with the launch of a high-tech remote
From ANZ today: Bulk commodity prices improved on Friday, but ended the week softer. Iron ore prices have settled around the USD116/t level in line with a pick-up in Chinese steel prices and Baltic capesize rates, which were up another 18.8% last week. However, the mood is still cautious in China as rumours of ongoing