Yesterday’s iron ore price action was of the consolidation variety: But Chinese steel prices continue to improve:
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Daily iron ore price update (TSIPIO62 Index)
Primary Section
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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Commodities daily
Courtesy of ANZ. ANZ Commodity Daily 708 190912
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Iron ore price bottom is in
In some good news for the Australian economy, it looks like the medium term bottom is in for the iron ore price: That’s an encouraging table with the entire steel complex on the up. Here are the charts: My retest of the lows looks to have already happened and moved on. Indeed I think it’s
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Coking coal dumped again
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
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Fortescue gets its rescue
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
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Daily iron ore price
The rally continues, this time in Chinese steel prices as well: And the charts:
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Commodities daily
Courtesy of ANZ. ANZ Commodity Daily 706 170912
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Daily iron ore price update
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
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Commodities daily
Courtesy of ANZ. ANZ Commodity Daily 705 140912
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Dark thoughts on Fortescue
Alphaville continues its excellent thoughts on Fortescue this morning: Trading halts are a feature of the Australian stock market in the way they aren’t in the UK, where they are rarely granted for companies on the official list. (Reverse takeovers are the main exceptions.) That can be a positive but also a source of frustration. Take
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AFR: Fortescue to get debt relief?
The AFR is reporting that: Fortescue Metals Group has entered a trading halt after having progressed discussions with its lenders about relaxing some of its debt covenants “significantly overnight”. It expects to make an announcement about a restructuring of its bank facilities before the start of trading on Tuesday. Wonder what ore price assumptions the
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Will QE3 inflate iron ore?
Here is yesterday’s iron ore price action: And the charts: Definately feeling like a dead cat today. More interesting, however, is the question of whether bulk commodites will enjoy a boost from the monetary push coming from QE3. It has not been easy to judge in the past whether this is the case. My feeling
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Coking coal contracts settle at $170
Courtesy of ANZ: Newcastle September coal futures slipped 0.3% to USD90.70/t, while coking coal shed 2.5% to USD148.75/t. Q4 coking coal contract negotiations have been completed between BMA and Nippon Steel, with the price settling at AUD170/t. Although this is an AUD55.00 decrease from Q3 contract prices, the USD20 premium to spot prices was in
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Iron ore price weakness set to resume
Yesterday ANZ had an interesting conference call about iron ore, China and Australia. The economic legs were all a bit sunny and happy but the iron ore dimension was very good: 2. MARK PERVAN, HEAD OF COMMODITY RESEARCH Thoughts from China General mood very cautious, key export province Guangdong seeing activity down as much as
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Iron ore price cracks the ton
And there you have it! Iron ore raises its bat to the crowd and the dressing room, cracking the ton! And the charts: And Chinese steel following through: Adding to the joy, China’s steel output fell materially in August, down 4.9% to 1.89 millions tonnes per day in August from 1.99 million tones per day
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Are exports to China set to jump?
By Leith van Onselen An interesting piece of information arising from yesterday’s Chinese data dump was the increase in imports from Australia, which grew by 10.9% in the month of August and by 2.9% over the year. A chart tracking Chinese imports from Australia (in USD) against Australian exports to China (in AUD) is shown
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Iron ore price rockets
Kaboom! Up she goes across the board with follow through also in Chinese steel. The charts for ore look like this: The charts for steel like this: Looks like the bottom is on, more or less. Still reckon we’ll see a retest. And in the medium term I hope we heed the warning of the
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Fortescue blazes the trail of denial
From the AFR this morning: Packer family lieutenant Ashok Jacob, who runs fund manager Ellerston Capital, has likened the rise and fall of the iron ore price to the boom and bust of technology stocks and Japan’s 1980s bubble economy. …“You are not going to move on to a new glorious outcome in terms of commodity
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Coal projects get the chop
This afternoon coal major Xstrata announced a bunch of job cuts in the face of ongoing falling prices but more interesting was the following part of the release: Although we are not breaking down the reductions by individual site, the restructure is focused on scaling back high cost production at some of our mines. We do
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Coking coal falls heavily
We may be seeing the beginnings of a bottom for iron ore but the same can’t yet be said for coking coal. From ANZ: Spot thermal coal fell 2.3% to USD86.37 last week, while coking coal shed 5.4% to USD153.20/t. Coking coal prices continue to drift lower as buyers stay on the sidelines awaiting the results of Q4
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An iron ore squeeze
It’s an eye-popping iron ore table today: So, the exuberance of last week finally seized parts of the steel complex with 12 month swaps hitting the proverbial afterburners. Up 9.1% on the day! And who said there’s no speculation in the iron ore markets? Spot followed with a solid climb: Needless to say, with the
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Iron ore and the Australian economy
ANZ has a solid note out on the impacts of the falling iron ore price on the Australian economy. You can nit-pick bits and the various macro components may not play out as suggested but in aggregate it’s good and worth a read. Iron Ore Update August 2012
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Iron ore price stabilising?
It’s all good today! Not much movement overnight in the steel complex but enough to suggest that the big falls are behind us. 12 month swaps are starting to price with some consistency in the mid $90s range: There is also clearly a lift in broader sentiment as Draghi applies his band-aid and although it
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Macro Investor: Shorting iron ore
Iron ore prices (as measured by 62% fines) have fallen over 50% from their peak at almost $200 per tonne, after doubling twice from early 2009. This dynamic is due to collapsing demand, as inventories in China climb to new heights amid increasing volume output from Chinese, Australia, African and Brazilian suppliers. …Due to the
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Is the iron ore price fall structural?
As I wrote yesterday morning, I’m on board with the iron ore bounce theory. There is enough Chinese stimulus in the pipeline to get things moving for a while later in the year (I think!). Though I’m seriously starting to wonder from what price the bounce will come. Overnight action was not too bad for
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Steel glut versus more trains
Steel industry in China is now known to be unprofitable. Profit margins are close to nothing, while production capacity is high. Meanwhile, banks have to roll over their debts, apparently, to keep them alive. However, production has not really slowed down much despite clearly slowing demand. Worse still, and interestingly (although not surprisingly), we learned yesterday that the steel
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Iron ore volumes showing the pain?
Yesterday Port Hedland released its August shipping statistics including iron ore tonnages, which looked like this: Not bad but closer inspection throws up a few worries. August tends to be a down month but this year the fall is 9.3% versus half that in the previous two years. Volumes tend to be highest mid year
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The iron ore dominoes
By David Llewellyn-Smith First up, yesterday’s iron ore price moves, which are not pretty: So, a new low for spot, 12 month swaps rolling over and Chinese steel prices still weakening. Complimenting the price action, the international interest in iron ore ramped up again last night with more bearish analyses. The first story of interest
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Iron ore price weakness returns
It’s not been much of a bounce so far. Here’s yesterday’s ore score: That’s some ongoing carnage in Chinese steel prices: More forells ahead it seems.
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Iron ore exploration expenditure explodes
By Leith van Onselen The Australian Bureau of Statistics (ABS) released Mineral & Petroleum Exploration data, which revealed a slight easing in exploration expenditure after last release’s record. Nationally, expenditure on minerals exploration fell -$76.7 million in the June half, with petroleum exploration expenditure also falling by -$157.7 million (see below chart). Expected mineral and