Readers will know that the MB view is that the stronger this year’s global recovery, the quicker that China will tighten its most recent credit binge as its export sector booms. That clamping is already underway. The reason why is well known and understood. In its formative stages, super-charged catch-up growth in a developing economy
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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Global Mining Research has a nice primer on the emergence of green steel. Green Steel – Why is it relevant? The production of steel is one of the most polluting industries from a CO2 perspective, representing in the order of 8% of global emissions. For the miners ESG reporting has never been as relevant and for
Iron ore prices for February 9, 2020: Everything up again. Have I made my sell the rallies call too early? Reuters reports that ex-China demand is rebounding: But, as Chinese credit shows today, the slowdown in China is being baked in now. It won’t arrive until H2 but it’s coming: As well, Chinese steel mills
Iron ore prices for February 8, 2020: Everything up. The AFR muses on China’s greening: Macquarie has modelled a scenario where China’s 7.7 per cent year-on-year production growth in December is sustained in the first quarter of 2021, then a trend slowdown of 1.5 per cent month on month takes hold through to the end
Via Westpac’s excellent Robert Rennie: Back in November we introduced a simple iron ore port inventory model (specifically an inventory deviation model – see “Negative iron ore supply shocks waning“) that could be used as a useful indicator to point to where iron ore prices might settle down to if we saw signs that the
Iron ore prices for February 4, 2020: Spot and paper flew. Steel has not updated. CISA output for the last 10 days of January remains outrageous. In news, Vale’s Q4 production report was encouraging for supply: Vale’s iron ore fines production totalled 300.4 Mt in 2020, in line with 2019 as a result of (i)
Iron ore prices for February 2, 2020: Everything smashed. Market expectations of a tightening market are being dashed: Crushed Chinese steel mill profitability has triggered destocking. COVID outbreaks have hit Chinese demand so steel prices are falling as well, meaning more destocking. Chinese monetary and fiscal tightening will intensify as the year deepens, especially on
Iron ore prices for Feb 1, 2021: Spot and paper down. Steel has not updated. Port inventory rose last week to 126.2mt: Yesterday China steel PMI was poor. The headline number is OK at 43 with new year output pumping on the inventory build. But new orders have cratered: This may be temporary based upon
Iron ore prices for January 29, 2021: Spot and paper up. Steel table. China has received its first new load of scrap steel since easing the border: The first cargo of recycled steel bought after China reopened its doors to ferrous scrap imports has arrived and been discharged, and initial market apprehension around whether it
Iron ore prices for January 28, 2020: Spot down. Paper down. Steel OK. I’m going to call it today: the peak is in. In short: so far, La Nina disruptions have been minimal but this remains the biggest upside price risk; Chinese inventories are still low but there appears limited appetite to restock further with
Iron ore prices for January 27, 2020: Via Reuters: As a result of a sharp rise in production costs and weak steel demand, “steel companies in the north have already suffered large-scale losses”, Sinosteel Futures analysts said in a note. “Market demand for raw materials is expected to deteriorate further in the near future,” Sinosteel
Via MySteel: Beijing has been working quietly on carbon emission cuts for a few years but its open pledge in 2020 to peak the country’s carbon emission by 2030 and to achieve carbon neutrality by 2060 has undoubtedly imposed more pressure publicly on the steel industry, the country’s second largest carbon emission source only after
It’s not new. We’ve seen it before. Every attempt fails. But a new plan is afoot to end China’s real estate driven growth addiction that keeps Australian iron ore above $30. Via Societe Gereral: Policy directions in 2021: normalisation, de-risking and reforms The Central Economic Work Conference reiterated policymakers ’intention to continuing with policy normalisation
Iron ore prices for January 21, 2021: Spot and paper up. CISA released late December steel output: There was a serious demand surge into late December in China. This was the same period that steel inventories got run down so it was big. It helps explain some of the explosive price action. No change to
BOM cyclone forecast: A Tropical Low was located at 2:00 am AWST near 11.8S 124.8E, that is 740 km north northeast of Broome and 1160 km northeast of Port Hedland and moving west southwest at 18 kilometres per hour. The tropical low is moving towards the west southwest and is expected to gradually strengthen. It
Iron ore prices for January 19, 2021: Spot and paper down. Not much in news. Via Westpac, Aussie iron ore volumes have been expanding slowly: Our bulk shipping activity models point to a noticeable increase in iron ore exports from Australia in December, with a forecast of 78.6mt. While that is up 8mt from the
Iron ore price for January 18, 2021: Spot is firm. Paper took off. Rebar has not updated. Looking forward, Clive Russell has the right idea: At the same time Beijing opened the stimulus taps, there were supply concerns, particularly in number two exporter Brazil, and third-ranked South Africa, as mines and transport systems were hit
Iron ore prices for January 15, 2021: Everything firm. Port stocks fell last week to around 125mt. China imported 96.75mt in December and 1.17bn in 2020, up 9.5%: As for the year ahead, my thoughts are these: Chinese iron ore restocking is ongoing (bullish); Chinese mills have run down COVID steel stocks (bullish); global recovery
The iron ore complex settled a little on Thursday, although shorter-term futures pushed higher as restocking demand increased at mills across China. Texture from Reuters on the record levels of imports of iron ore: “(Mills) are currently at pre-holidays restocking period, adding that steel profits are good, there’s a possibility that they will increase purchase
The iron ore complex was still elevated in trading yesterday, but coking coal futures took a dump as spot iron ore remained bid above the $171USD per tonne level: Having run at huge levels through much of last year, Chinese steel inventories have corrected to normal levels: This leaves mills with less scope to manage
Via SCMP: Brazilian port operator Grao Para Multimodal’s executive director, Paulo Salvador, knows there is plenty of untapped high-grade iron ore in northern Brazil, but a mix of bureaucracy and limited capital have stymied efforts to begin production for years. Across the states of Para, Piaui and Tocantins, there are at least three mines amounting
Winter restocking in China has disrupted steel prices across the iron ore complex with rebar futures down more than 3% during Tuesday’s session before slightly recovering, as coking coal also dropped. This hasn’t effected the spot iron ore price, or indeed Dalian futures which are treading water: The fallout from the WA government’s cash grab
The iron ore complex had a wobbly start to the trading week as futures dropped alongside spot prices on Monday, as stockpiles increased for a second consecutive week on easing seasonal demand. Rebar futures dropped the most, down nearly 4% while spot iron ore still remains above $170USD per ton: Meanwhile the Samarco mine will
Via Goldman: 1) OPEC and Georgia help neutralize near-term risks. The events of last week substantially reduced the downside risks to our bullish commodity narrative — a fact reflected in the rise in oil and copper alongside the sharp decline in gold. First, Saudi Arabia agreed to a unilateral production cut that neutralized current lockdown
The iron ore complex rose once again Friday, sending spot prices slightly higher while Dalian futures rose over 3%, dragging rebar and coking coal higher as stainless steel futures also lifted: The WA Government has slogged iron ore ship operators in the Pilbara region, trying to extract yet more funds this time in the form