A quiet day yesterday in the ore complex, although the 12m swap softening is not great. It looks well and truly stuck. No news today but it’s worth reiterating yesterday’s story in the AFR about China’s move to protect local ore miners: China is looking to halve the tax rate paid by its domestic iron
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
Missed this earlier. I have warned that the assumption by Australian miners, sell-side analysts and government – pretty much everybody – that the Chinese will lie down and let foreign imports displace local ore production is just a little naive. And now we have the proof. From the AFR (h/t NM): China is looking to
A poor day yesterday across the ore complex with falls in Chinese steel leading iron ore spot and swaps lower. Here’s the ore chart: And steel prices: As I’ve been warning for a week or so, all of my metrics are overstretched. Unless rebar bounces the rally is done. Interestingly, rebar is falling even as
Late yesterday, CBA produced a note with the combined resources of its economics, commodities, currency and equities teams that argued that: With commodity prices off recent highs a question is being asked is, “Is the resource boom over?” We put that question to CBA’s Economics, Currency,Commodity and Equities research teams. They conclude that the resource boom is a
Courtesy of ANZ. Newc FOB physical thermal coal and Australia FOB coking coal prices firmed last week, with Asia demand showing signs of improvement for early next year loadings. Reports suggest traders were covering their short positions before closing their books or the year and ahead of Xstrata’s annual negotiations with Japanese utilities for thermal coal contracts starting in January. Reports
Here is Friday’s iron ore price table: And the ore price chart: As well as Chinese coastal bulk shipping rates: It’s good news for thermal coal basically, which continues its nice rally on better Chinese electricity generation. For iron ore, the topping pressure is still there in our spreads. First, the 12m swap/spot spread looks
Iron ore continued to edge higher yesterday, perhaps helped by the resolution of Chinese leadership: Not much more to say today but came across the following classic from Creamer’s Mining Weekly: While iron-ore prices appeared set to make a partial recovery, they would remain volatile, as revised Chinese growth targets and performance were likely to result
Courtesy of ANZ: Newc thermal coal futures posted stronger gains overnight. Now that China’s 18th National Congress leadership changeover has ended, we could see growth momentum pick-up. However, gains will be capped by excess Chinese coal inventories (sitting around 30 days of supply). Iron ore prices were flat around USD122/t, as China spot steel and rebar futures markets were subdued, but
Here is today’s iron ore price table: Lot’s of news today. First, CISA reckons the rally is done: A recent rally in steel prices in China, the world’s top steel market, may lose steam as overcapacity continues to eat into steel makers’ margins, offsetting a recent drop in inventories, the China Iron & Steel Association
Here is the iron ore price table for November 13th: Given neither steel prices not the 12m wants to budge, it’s worth revisiting the spreads we follow. First between the 12 month swap and spot: And between rebar and spot: And then the above chart expressed as a spread percentage: Now that’s what I call
Find above the ore complex price table for November 12. The news today is all in the other bulks, where we find a little bounce happening for both coals, coking and thermal, on improving Chinese data. From ANZ: Newc physical FOB thermal coal prices rose, in line with better China data. Electricity production in China rose
Find above today’s iron ore complex table. Here are the charts. Spot and 12 month swap: The spread between them is running out of room for this price level: If you think about it, the spread makes a fair amount of sense. Current iron ore demand is boosted by restocking and Chinese leadership transition hopes.
Find above today’s ore price complex table. In wider news, Reuters offered a good snap shot of the dynamics in the market overnight: “Most takers of cargoes are traders who are trying to keep the market up, expecting some good news for the steel sector to come out from the China congress,” said a Shanghai-based iron ore trader.
From the AFR: The future of the $6 billion Oakajee Port and Rail project in Western Australia has been cast into further doubt, with Japanese owner Mitsubishi to freeze spending and pare back its workforce on the troubled venture. Mitsubishi’s efforts to reinvigorate the project have been stymied by weakening iron ore prices, ongoing global
Above find today’s iron ore complex chart. As predicted, the 12m/spot spread is now reverted to mean, but it looks like the the spot price is set to drag up the 12m, not other way around. Before we get to that, Port Hedland yesterday released its October shipping volumes: The big improver was China, which
Find below the new “Aussie Mine” report from PWC, an annual assessment of the landscape and prospects for the mid-tier Australian miners. I don’t recommend reading this for any other reason than the good laugh available in the assessment of China from pages 3 to 7. If ever there was a report that captured the
Here is today’s iron ore complex table, which is the reverse of yesterday: However, the big news today is all about the news (as it were). Australia’s economic godfather, Ross Garnaut, spent most of yesterday throwing his wayward children into a blast furnace for daring to dream of an endless commodities boom. “In China thermal