Iron ore prices for October 28, 2020: Spot up. Paper up. Everything up. Empties are back: It is entirely possible that we’ve bottomed here. Year-end restocking is a very powerful force: I can’t see iron ore flying away as global markets melt but buying the crash in miners is a good short term play into
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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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Iron ore prices for October 27, 2020: Spot was firm and everything else soft. Empty apartment sales have rebounded: Whatever the hiccup it is passed. So, I still see weakness over the next few weeks in line with broader markets then a resumption of bullish prices through new year looking for an ultimate top and
Iron ore prices for October 26, 2020: Spot down. Paper firmed overnight as broader markets tanked. Steel is softening. Chinese port inventories jumped above 128mt last week: This remains a bullish story given there is another 32mt to go. That said, the rate of climb is very sharp so mid-2021 will cover it off. Empty
Iron ore prices for October 23, 2020: Spot was down sharply. Paper too. CISA output was still extreme mid-October. Inventories remains stupid My guess is we’re getting ready for a puke lower here. There’s plenty of supply again with much more to come. Chinese demand looks good on an output basis but beneath that leading
Iron ore prices for October 22, 2020: Spot down. Paper down. Empty apartment sales have stabilised but that is not enough. They must grow or steel demand will shrink as catch-up growth rolls off: CISA is bearish: That’s only mill inventories. Trader inventories are also immense, combined for easily the highest ever seasonally-adjusted: There should
Iron ore prices for October 21, 2020: Spot up. Paper up. Really just following broader trends of USD weakness. China’s empties are rebounding: ‘ It looks like sales have been pushed around a lot by stimulus-led discounting waves: But there are still signs of weakness creeping in. Price growth is weak, starts have softened and
Iron ore prices for October 20, 2020: Spot stable. Paper too. Chinese property sales remain questionable: The big news is Vale and it’s not good for prices: Here’s the production resumption timetable: That’s production increases of: 6mtpa more this year. 23mtpa in H1,21. 34mtpa in 2022. 17mtpa in 2023 20mtpa in 2024. 100mt over 2.5
Via Vale today: Vale´s Production Report for the third quarter of 2020 (3Q20) was announced on Monday, October 19th. The company is evolving with its stabilization plan and delivered a strong iron ore production in 3Q20. Nickel and Copper businesses managed to recover productivity for a solid start in 4Q20, after normalizing routine maintenance in
Iron ore prices for October 16, 2020: Chinese empty apartment sales have turned. Let’s see where they go from here: In other news: China-backed consortium SMB-Winning aims to bring blocks 1 and 2 of Guinea’s massive Simandou iron ore deposit into production by 2025, Chairman Fadi Wazni said on Friday. The consortium – which includes
Via Reuters: China is expected to issue new standards for steel scrap at the end of 2020, the official Xinhua news agency reported, in a move that will allow material meeting them to enter the country after a ban on solid waste imports goes into effect. Beijing currently categorises most scrap metal as solid waste,
Iron ore prices for October 14, 2020: Spot down. Paper down more overnight. We’re going lower here. Indeed, I’m starting to wonder if there isn’t a little shock unfolding. Brazil is recovering steadily: More importantly, property sales in China have tanked: A few cities have tightened property curbs for investors in recent months but that
Iron ore prices for October 13, 2020: Spot troubled. Paper too. We should see more price fall before the year end rally. Steel output remained insane in late September: Iron ore imports as well above 108mt: Steel exports are shite still: So are empty apartment sales: Steel output can stay strong through winter: China’s largest
Iron ore prices for October 12, 2020: Spot down. Paper too. Coking coal is flying on the Aussie bans. Chinese empty apartment sales have fallen off the proverbial: While Brazil is doing OK with the virus: Things are looking considerably less rosy here. If those property sale don’t turn soon then iron ore is going
Still no price action during China’s Golden Week holiday. Chinese empty apartment sales are still fine: But the action is on the supply side. Brazil’s September exports launched to nearly 38mt: As virus numbers fell: Though one wonders if a virus rebound is not imminent with the reopening. Still, the trend in Brazilain supply has
Iron ore prices for September 30, 2020: The whole complex launched on the Port Hedland virus scare. A big overreaction unless I’m missing something and the virus has already skipped the boat. Underneath that, the broader signals are still weakening. The Chinese steel PMI was downright poor with new orders a particular concern: With mill
Iron ore prices for September 28, 2020: Spot up. Paper too. Steel is holding. Port stocks popped above 120mt: At the current rate of accumulation, it will take until mid-2021 to get us back to the peaks. If anything, there is a danger that China will want to stockpile even more as relations deteriorate. Property
Let’s get a few things straight. In recent times we’ve seen a swag of analysts and apologists grabbing at the pearls as they worry that “China will cut off Australian iron ore”. Some are even contending that the recent slow disembarkation at Chinese ports is evidence of such, even though delays have hit ships from
Via the Office of the Chief Economist: In the June 2020 Resources and Energy Quarterly (REQ) we pointed out that “unlike downturns in previous decades, this downturn was not due to the bursting of excesses built up in the financial system…or in equity markets…. It also differs from the 1970s recessions…which helped contribute to stagflation and
Iron ore prices for September 25, 2020: Spot firmed. Paper too. Still waiting for steel to update. I’m still looking for a downside into $100 range ahead. There are plenty of softening signals: But I still reckon that this correction is largely seasonal in nature. The CCP has no choice but to keep building while
Iron ore prices for September 24, 2020: Spot up. Paper down. Empty apartment sales are still fine: World Steel released its latest: World crude steel production for the 64 countries reporting to the World Steel Association (worldsteel) was 156.2 million tonnes (Mt) in August 2020, a 0.6% increase compared to August 2019. Due to the ongoing difficulties presented by
Iron ore prices for September 23, 2020: Spot down again with more to go. Paper too. Steel has not updated. Steel output remains crazy into mid-September, via CISA: Indeed, steel inventories are huge for this time of year: I remain relatively comfortable with this given steel mills are policy operations at this point. That said,
Iron ore prices for September 22, 2020: Empty apartment sales have softened: China is struggling big time to lift the consumer as they save their butts off: Which leads only to the conclusion that MOAR empty apartments and MOAR bridges to nowhere are coming. Brazil is slowly doing better with the virus: I still see
Iron ore prices for September 18, 2020: Everything up. CISA early September production easing as it usually does, from amazing levels. I’m still looking for a larger seasonal drawdown of the entire ferrous complex in the weeks ahead. Empty apartment sales are still fine: Vale is still getting buffeted by criticism, via Reuters: Vale SA
The Australian dollar is up and about after more preposterous ABS jobs numberwang: Bonds are selling a little: As are stocks. I still favour some more correction: Big Iron is copping it with FMG hammered. This is a classic seasonal BTFD over the next month, in my view (which is not advice): Sad to say,
Via UNHCR today: Extractive industries 15. In January 2019, 270 people died when Vale’s Córrego do Feijão tailing dam in Brumadinho collapsed.13 Most of those killed were Vale workers having lunch in the cafeteria located directly below the tailings dam. The force of the toxic mud dismembered bodies, and shattered what was a bucolic community.