Courtesy of ANZ: Bulk commodities declined, despite a 1.7% increase in Baltic Capesize freight rates and slightly higher Chinese rebar prices on Friday. The bearish sentiment from China’s weaker than expected flash PMI read and squeeze in credit availability weighed on steel demand for bulk commodities and associated prices. Physical iron ore prices declined 1.7% to
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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Readers will know that all of the major miners are currently aiming to divest assets as a way of bolstering their balance sheets. BHP managed to offload a stake in its emerging Jimblebar mine last week. But the two buyers were already joint-venture partners in the project. Since then we have had confirmation that Fortescue
Find below the daily iron ore price table for June 21, 2013: I wouldn’t call and end to the rally yet. And the charts: Our spreads remain at appropriate levels: And rebar is still struggling badly: There was some hope from China with positive rhetoric from Hebei. From the Iron Ore Team: Iron-ore prices have bottomed
Charts returning Monday. Yesterday’s iron ore price is an impressive 60 cents rise to $120.60. 12 month swaps rolled over to be down slightly at $113. Rebar average was flat but rebar futures fell. A very strong performance in the circumstances illustrating that a restock is definitely supporting the market in the short term. Be
From ANZ: Physical iron ore prices firmed 2.0% to USD120/t. It was another positive day for iron ore swaps (IOS), with prices rising again across the curve. SHFE rebar futures also firmed, with the most active Oct13 contract up 1.3% to RMB3,526. IOS prices pushed higher amid reports of firmer physical deals and ongoing gains in the Baltic capesize index.
A good story today from BRW: Allan Ruming has watched Mackay’s fortune unravel at close quarters. As mining companies slash spending in the face of falling commodity prices, the revenue of his engineering company will plunge from $7.4 million to $2.4 million this financial year – and $1.9 million of that came in the six months to December. “It
Cross-posted from Kate Mackenzie at FTAlphaville. That’s from Deutsche Bank today. We joke, we joke. A little. Deutsche had of course already joined the commodities-supercycle-is-dead chorus, and this note is not from the commodities side but by Asia chief economists Taimur Baig and Jun Ma. Ma, who covers China, wrote an interesting and widely-read note about China’s pollution
Courtesy of ANZ, who got their call on the iron ore bounce this week just right: Physical iron ore prices rose 1.2% to USD115/t. Iron ore swaps firmed across the curve, in line with physical prices. The most active Jul13 traded USD2.75 higher to USD114.92/t (hit a high of USD115.75/t intra-trade). Oct13 SHFE rebar futures
Still got some technical issues today but iron ore rose one percent or so to $112, which is better than I’d feared. However, pressure will remain with Shanghai rebar dropping further to 3,386 yuan. CISA reported yesterday that Chinese steel production cuts have begun in earnest, down 4-5% in late May from mid May. More to
Having some technical issues today. Below is an IG table with iron ore at the bottom. Still no change on Chinese holidays. ANZ is out suggesting a short term bounce may be in the offing. That’s a brave call given the deteriorating context but the overall assessment is useful: Bulk markets look oversold, but face
Ernst and Young has a new risk report out that is unsurprising but nicely summarises the state of mining: The twin capital dilemmas of capital allocation and access to capital have rocketed to the top of the business risk list for mining and metals companies globally, up from number eight in 2012. These capital dilemmas
Find below the iron ore price table for June 11: Not movement as China remains on holiday. The 12 month swaps continues to cling impressively to $108-10. In news today, Macquarie Bank brings hope. From Bloomie: The commodity used to make steel will fall for another four to six weeks until China’s stockpiles bottom out
Find below the iron ore price for June 10, 2013: Note iron ore and swaps fell Friday but not yesterday. I expect further weakness on China’s lousy data and rebar falls but yesterday markets escaped. On the week, Chinese port stocks rose slightly. Here are the charts: Rebar average is rapidly approaching 2012 lows: In
Find below the iron ore price table for June 6, 2013: Rebar futures also sold off. And the chart: The dead cat is losing his levitation. Perhaps the broader global bounce today will help. Rebar stabilisation would be better. Today’s news is an effort by Glenn Dyer or Bernard Keane (or both) which comes up
Courtesy of ANZ: Physical iron ore prices were unchanged at USD116.6. Talks of steel mills in China replenishing stocks supported the iron ore market the last couple of days, but weakness in the iron ore swaps (IOS) markets overnight suggests it could have been a false start. Front month Jun13 IOS contract declined USD3.83/t to
Two opposing views on the iron ore price are offered today by Credit Suisse and Goldman Sachs. CS remains bearish: Much of the recent decline appears linked to a reduction in mills’ iron ore inventories (Exhibit 26), albeit port stocks are now rising. Given the apparent overhang of steel stocks in both the hands of
Find below the iron ore price table for June 4, 2013: Obviously a very sharp bottom confirmed yesterday. I’ll stick with my call that it’s a dead cat for now, though as we know they can levitate for a while. From the AFR today come comments from the chairman of Baosteel, Xu Lejiang confirming the changes in
From the ANZ: Iron ore markets rebounded, up 1.4% to USD111.9. China’s HSBC PMI fell to 49.2 yesterday, contradicting the official PMI May figure of 50.8 released at the weekend. But optimism prevailed, with Oct13 SHFE rebar futures ending the session 0.8% higher to RMB3,459/t, supporting front-month iron ore swap (IOS) and physical iron ore
Over the weekend the AFR’s Anne Hyland wrote a terrific piece on the coal bust: It’s coal’s darkest hour. The once-in-a-generation coal boom is over. Incredibly, the world’s biggest mining companies such as BHP Billiton and the tribe of billionaires the coal boom enriched – from Gina Rinehart to Nathan Tinkler – didn’t see the
The SMH has a good story from Reuters this afternoon on the iron ore rout: The root cause of the current weakness in the iron ore market is the same as the last time around, namely margin compression in China’s steel sector. The tension between a previously largely steady iron ore price and falling steel
From ANZ: Iron ore prices plunged another 4% to USD112.9/t. Iron ore prices are 29% lower than the most recent high in February and are at a seven and a half month low. FOB Australian coking coal prices also declined to USD140.35/t on bearish sentiment. A 1.3% decline in the most active Shanghai Oct rebar