The remarkable turnaround is now complete: That’s a huge payout ratio, turning the stock into a cash pump if the iron ore price holds up. Of course it won’t, but with gearing so thoroughly reduced it can ride out the volatility by borrowing at the troughs to support the dividend. It should make the stock
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
Iron ore price charts for August 18, 2017: Tianjin benchmark fell 60 cents to $75.10. Paper soared. Coking coal was stable. Thermal is in heaven. Chinese iron ore port stocks fell 1.8mt to 135.2mt. Do we have another bulk commodity shortage? Chinese steel mill stocks have been rising as port stocks fall so this
Via Macquarie: China’s latest macro-release this week gave an ambiguous picture on the health of the economy. Conflicting signals from June and July numbers, between macro and micro data, and with respect to liquidity vs money supply are just some of the issues. We see the property market slowing in 2H but FAI picking
Back in saddle after this morning’s dummy spit, Credit Suisse has some of the finer detail driving the coking coal rebound: China struggling to meet demand China demand is stronger than anticipated due to solid steel production, which is probably enhanced by the closure of induction furnaces and their replacement with blast furnace steel. Against
Iron ore charts for August 14, 2017: Tianjin benchmark was unchanged at $74.30 though I suspect that should read “unupdated” given big falls in steel and iron ore futures. I still think we’re at the top here. Everything is inflated, demand is fading, stocks are high. There’s no mileage in bidding prices up. The question
Via Reuters: Chinese iron ore futures dropped more than 2 percent on Monday, adding to the previous session’s steep losses, as steel prices extended declines after the Shanghai exchange increased transaction fees to fight speculative trading. The higher fees followed a rally in rebar futures last week to their highest since 2013 amid strong volumes,
Via Macquarie: Iron ore update: restocking, skewed demand & cyclically wide discounts Increasing optimism towards 2H17 steel demand, together with talk of further steel capacity cuts, has prompted Chinese mills to restock iron ore, driving the spot benchmark price to over $75/t in August, up by ~$22/t from the lows of $53/t touched on
by Chris Becker Here’s the latest from the iron ore/steel price complex: Obviously, steel prices are on the rise as iron ore goes to the moon. And that’s got the authorities in China worried. More from CNBC: In March, the government announced plans to slash steel capacity by 50 million metric tons this year in
by Chris Becker Iron ore prices have taken a small retreat midweek: Meanwhile, Gina Rinehart’s Roy Hill project is nearly on track for its 55MT annual delivery capacity. From WAToday: Australia’s newest large iron ore project has produced 45 MT so far since it started operations in December 2015, but has been beset with operational
by Chris Becker Zoom! To the moon Alice with the iron ore/steel complex higher again: But its port stocks that have some concerned. Via Reuters: China’s steel producers are still riding the crest of the most recent government stimulus wave. Beijing’s 2016 package was channeled down the well-grooved paths of infrastructure and property, both
by Chris Becker Here’s the latest price update from the iron ore/steel complex with a small bounce back across the board after the mid week selloff: Meanwhile, Rio is contemplating the current low/high grade ore price difference maybe permanent.Text from the AFR: Rio Tinto chief executive Mr Jacques said he believed the wide price differential
by Chris Becker Here’s the latest price update on the iron ore complex: Clyde Russell at Reuters has the gist of the supply situation sorted: China’s surging steel sector is pulling iron ore along for the ride, but the strong gain in prices raises the risk that marginal supply of the raw material will start
by Chris Becker Here’s the latest from the booming iron ore complex, with a small retracement following Monday’s limit up moves: The UN’s CTAD 2017 report provides interesting context in this backdrop of what looks like another speculative frenzy for the iron ore market. Texture from Hellenic Shipping News: The 2017 issue of the report
by Chris Becker A bang on Chinese manufacturing PMI print and everyone goes nuts bidding up iron ore yesterday with futures in Dalian limit up, and other contracts up 7% or more! Amid the prints where the steel industry’s PMI which recorded a 15 month high. Here’s the price table and charts: More texture from Bloomberg:
by Chris Becker Here’s the latest iron ore price update with today’s Chinese PMI figures already factored in to futures: Its not good news enough for Vale though, even as production rates soar to new record highs, capital management and higher costs are weighing on the giant. More from Marketwatch/WSJ: Vale, the world’s largest iron-ore producer,
Iron ore price charts for July 27, 2017: Tianjin spot rose $1.20 to $69.60. $70 remains our point of control. Paper firmed overnight. Goldman has bulled up for this year, via Bloomie: Goldman Sachs Group Inc. boosted its iron ore forecasts after better-than-expected demand in China raised prices, but warned that it remains bearish