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
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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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
Find below the iron ore price table for June 28, 2013: And the charts: And rebar: The spreads are all normal: Chinese port inventories fell marginally last week to 74.9 million tonnes. And steel inventories remain very high. Which is where we find a little news flow with daily steel production rates still not falling.
Find below the iron ore price table for June 27, 2013: Some strength returned to iron ore and swaps clearly: But rebar has slumped below last year’s low now and shows no sign of reversing: Probably not as inconsistent as it appears. The iron ore restock likely persists, as does weak Chinese steel fundamentals. Expect
This story has been floating around since yesterday and I thought I had better address it: AUSTRALIA’S coal industry is at “a tipping point” and will survive only if government gets off the back of miners, Anglo American chief Mark Cutifani has warned. Mr Cutifani said 9000 mining jobs had been lost in Queensland and
Courtesy of ANZ: Physical iron ore prices fell another 2.2% to USD114/t, despite mixed performances across the Chinese rebar steel futures and iron ore swaps curve. Moves by the PBoC to ease tight liquidity conditions saw the recent sharp losses in Chinese equities (SHCOMP index) ease back, which supported sentiment for industrial commodities. Iron ore
The Bureau of Resource and Energy Economics (BREE) is out with its quarterly commodity forecasts and as I’ve noted before the tendency of the Bureau is towards optimism (making our pathologically positive PM proud). As a result it has had to slash its projections for the financial year just ending: The net result of actual
Find below the iron ore price table for June 25, 2013: As you can see, the iron ore market is weakening across the board. Rebar futures rose slightly. As did weekly Chinese iron ore port stocks, including those source from India. The reason is simple. From Iron Ore Team: Spot iron ore prices are likely