The ferrous complex was firm again on August 25, 2021 as spot and paper lifted. Steel has not updated: CISA data for mid-August is out and gave us a decent rebound though still down year on year: This is to be expected emerging from seasonal weakness. However, I expect output volumes to remain materially below
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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TSLomberd with the note: We buy a basket of five ‘green steel’ stocks: ArcelorMittal, ThyssenKrupp, SSAB, Fortescueand Voestalpine (MT NA, TKA GR, SSABA SS, FMG AU, VOE AV), equally weighted at 20% each relative to selling the SPDR S&P Metals and Mining ETF. While the green steel movement is still nascent today–saddled with high initial
The ferrous complex launched on August 24, 2021 as the flushed out bottom of last week turned higher with gusto as expected. Spot and paper boomed. Steel has still not updated: From a contact, the action was all speculation: 09:55:30 The credit meeting. PBOC Governor Yi Gang hosted a meeting yesterday regarding monetary and credit
The ferrous market continued to sink on August 23, 2021 as spot fell and paper kept going overnight. Steel has not been updated: There’s no respite for iron ore. Nor should there be. The glut means the price needs to fall to the highest marginal cost producer somewhere around $80, at best. The more interesting
I keep saying it. Chinese infrastructure investment has a problem. Authorities have been trying half-heartedly since May to get local governments borrowing but they just won’t: The slow pace of borrowing by local governments in China and curbs on the property market mean the economy will receive less of a boost this year from infrastructure
No need to adjust your TV set. The following ferrous complex numbers for August 19, 2021 are correct. Spot collapsed. Paper recovered some poise overnight. Steel is being sucked into the vortex: We’re now down over $100 in a couple of months. Generally speaking, when we see a spot price collapse of this magnitude, it
The ferrous complex was very weak on August 18, 2021 with spot at new lows, paper falling further overnight and steel capitulating as well: BHP upset the applecart: Iron ore extended its rout as BHP Group warned it sees an increasing likelihood of “stern cuts” to China’s steel output this year. The prospect of much
The ferrous complex was weak again on August 17, 2021 as spot hit news lows, paper fell further overnight but steel bucked the trend: There’s not much else to report which is the problem. No China stimulus means we are going lower. In news of interest, there’s Ivan Glasenberg at the AFR: There are going
The ferrous complex was mixed on August 16, 2021 as spot edged up, paper fell overnight and steel puked: The weak Chinese data was alarming for ferrous inputs. The slowdown underway in China is being led by construction and steel output: On the day, the ferrous market managed to make a play for bad news
The more things change the more they stay the same. Long term readers of MB will remember the Sykesnado of 2015. That was when readers took legendary financial journalist and stock picker, Trevor Sykes, to the cleaners: Not only does the plunge in BHP Billiton shares following the Minas Gerais disaster in Brazil look overdone,
The ferrous complex was mixed on August 13, 2021 as spot fell, paper firmed overnight and steel was stable: As interesting as these daily numbers are, the real story is elsewhere today. CISA released its steel output data for early August and it is stunning, crashing below comparable 2019 levels: Moreover, steel inventories climbed over
The ferrous complex was weak on August 12, 2021 as spot tumbled and paper was hit overnight. Steel has still not updated: A chart today from UBS gives us great insight into what is happening in Chinese steel demand: As you can see, both steel and iron ore inventories have been roughly stable in China
A noted earlier today, Chinese credit growth is slowing fast. Some interesting texture from Goldman: July TSF flow and new CNY loans both came in below expectations, after both indicators surprised to the upside in June. Sequential growth of TSF stock moderated to 9.3% mom annualized sa in July from 11.1% in June, and overall
The ferrous complex was mixed in reverse on August 11, 2021 as spot jumped, paper tanked overnight and steel has still not updated: Markets are still hopeful of further Chinese stimulus but the truth is the economy is slowing fast and credit even faster with new yuan loans falling away at an impressive clip: And
#China‘s major construction machinery firms sold 17,345 #excavators in Jul, lowest since Mar 2020, down 9.24% y/y, said China Construction Machinery Association. Domestic sales fell 24.1% y/y, down for 4th straight month and overseas sales rose 75.6%.https://t.co/vVS0O9qEIi pic.twitter.com/AZxfceWlCd — YUAN TALKS (@YuanTalks) August 11, 2021 As I have been saying, all that steel production cuts
The ferrous complex was mixed on August 10, 2021 as spot was clobbered and paper jumped. Steel has not been updated: Global miners dodged a short-term bullet yesterday when the spot price did not fall. Now today’s catch-up tumble will be offset by the jump in paper. Still, what does it matter? The market is
The ferrous complex entered the coconuts phase on August 9, 2021 as spot was stable, paper crashed and steel fell: Why spot didn’t fall when Dalian was murdered is anybody’s guess. Usually when this happens there’s catch-up the next day. Every five years or so I have to write this same post. This is the
The ferrous complex was mixed again on August 6, 2021 as spot firmed but paper was blasted overnight. Steel was firm: The facts are now plain to see. Chinese demand is falling away as the demand stimulus “pig in the python” is pooped out. This stall is being transferred directly and swiftly to steel output
The ferrous complex was weak on August 4, 2021 as spot fell, paper slumped overnight and steel rebounded strongly: This is all pretty good confirmation that the market agrees that it got it wrong that China is about to abandon its steel output cuts story. It’s not. CCP mouthpiece, The Global Times, clarified it in
Moody’s had downgraded Evergrande, making it a triptych of rating agencies: Moody’s Investors Service has downgraded the corporate family rating (CFR) and senior unsecured ratings of China Evergrande Group (“Evergrande”), the CFRs of Hengda Real Estate Group Company Limited and Tianji Holding Limited, and the backed senior unsecured ratings of Scenery Journey Limited. …”The downgrades
The ferrous complex mixed onAugust 3, 2021 as spot firmed a touch, paper fell sharply overnight and steel was walloped again: The Dalian contract rolled forward which gives you some idea how steep is the backwardation. In news, it’s all about confusion, added to by the AFR: The Chinese government’s mixed messages on carbon emissions have sent
The ferrous complex dead cat bounced on August 2, 2021 as markets misinterpreted Chinese stimulus and ran with hope over fact. Spot and paper firmed. But steel was demolished: Reuters puts the cause on possible steel output cut reversals: Chinese ferrous futures fell on Monday, with steel rebar and hot rolled coils both plunging some
The ferrous complex was blasted lower on July 30, 2021 as spot was thrashed, paper was limit down, but steel firmed: The chart: The correction is happening for three reasons: Chinese regulatory clamps to slow steel output. Falling demand growth as Chinese property and infrastructure slow. Increasing global supply. There are have been three episodes
Evergrande appears to be going bust. It’s turning unruly and happening fast. Bloomie: China Evergrande Group’s crisis deepened after a court froze assets of its listed onshore subsidiary, spurring another selloff in its shares and bonds. The entire 20% stake in Shanghai-listed Langfang Development Co., held by the developer’s main onshore unit, was frozen from
The doom loop continues for Evergrande: Two more companies said China Evergrande Group failed to pay its bills on time, adding to signs of a cash crunch at the world’s most indebted developer. Huaibei Mining Holdings Co Ltd. filed a lawsuit against Evergrande in Anhui province, alleging a unit of the company missed payments, according
The ferrous complex was weak on July 29, 2021 as spot fell sharply and paper more. Steel has not updated: In my view, the correction has begun. These are unseasonal price falls and the headwinds are mounting fast. There are three reasons. The first is regulatory, via Bloomie: The export tariff on ferrochrome — used
The ferrous complex remained stalled on July 28, 2021 with spot and paper stuck while steel is still strong: In news, it’s all about RIO’s record first half report which beat consensus slightly. But, it is still bearish owing to two factors, First, new supply: Mining has commenced at the $2.6 billion Gudai-Darri replacement iron