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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TS Lombard with the note: Beijing is concerned about the impact of higher commodity prices on the Chinese economy and the possibility of cost-push inflation raising CPI. However, for the first time in over 20 years the driver of the commodity cycle is not China. Central authorities view DM stimulus and Covid-19-related supply shocks as
The ferrous complex was roughly stable on June 24, 2021 with spot iron ore down, paper flat overnight and steel going nowhere: A couple of extra charts today from mid-June CISA steel output which has rebound though is still flattening out: Year-on-year growth firmed but is still trending lower: No change from me. Firm pricing
The ferrous complex is playing a game of cat and mouse with Chinese authorities while the market remains tight. Spot was up. Paper up more overnight. Steel is stuck: The forward-looking view remains bearish. Supply is arriving from every spare and hidden and pile of dirt worldwide. From Darwin: Iron ore will leave the Northern
The divergence between iron ore prices and what is happening on the ground in the only market that matters for iron ore demand is reaching new wides daily. Readers will know that China’s “three red-lines” policy for deleveraging the property development sector is delivering with distressed developers defaulting and dumping assets, credit lines being pulled
Evergrande. Remember the name. Because it may just be forming the dark nucleus of an economic singulatory in China that will suck Australia across an income shock event horizon. Throughout 2021, I’ve been tracking the evolution of a new policy regime for Chinese mega-developers called the “three red-lines”. It aims to deleverage one of China’s
The ferrous complex rebounded on June 22, 2021 as fears of Fed tightening abated. Spot popped. Dalian firmed overnight but steel has not updated: Nothing much to report today. I still see firm prices for a few months then a breakdown in Sep/Oct followed by better across the new year but trending down deep into
And here they come. Note from UBS: Sell: macro headwinds with Fed hawkish & China acting to deflate commodities We downgrade RIO to Sell (from Neutral) with an unchanged A$104/s target. The stock has generated a TSR of 79% over 12mths driven by the strong iron ore price (+104%) & record cash returns; we estimate
The great Chinese property developer shakeout is intensifying. This has global significance because this sector alone accounts for an enormous slice of global bulk and base metals demand and therefore inflation. Bloomie has a great article today on the unfolding drama around the “three red lines” policy: Many developers have gamed the new deleveraging rules.
The ferrous complex was smashed on June 21, 2021 as steel broke down, paper was obliterated and spot fell sharply: Much of this is seasonal. The Chinese rainy season is stalling construction and lifting steel inventories: EOFY adds more downside as mills rebalance. That said, China’s jawboning campaign continues, via FT: Beijing has launched a
The ferrous complex was weak across the board Friday June 18, 2021 as spot fell, paper fell more overnight and steel eased: A rising DXY is proving a headwind. In news, let me show you some material from Bloomberg that needs unpacking: There’s a simple reason why no amount of work meetings and control orders
Truly, global markets do not understand commodity cycles. Some of this is folks talking their books. Some of it is pure ignorance. What we can say for sure is that as the commodities bubble pops, the leftover space is being filled with balderdash. All areas of the commodity market are being covered in rhetorical manure,
The ferrous complex went through some gyrations on June 17, 2021 with paper and spot markets crossing over trying to catch one another: There’s not much else to report in the day. Broader circumstances are clearly turning hostile to high prices as China tightens and slows ahead merging with a slowing US and Fed policy
The ferrous complex was weak on June 16, 2021 as spot, paper and steel all fell: There was a pretty nasty combination of factors. First this: The State-owned Assets Supervision and Administration Commission has ordered state-owned enterprises to control risks and limit their exposure to overseas commodities markets, according to people with knowledge of the
As expected, China continues its systemic push towards tighter credit and economic restructuring away from construction. This time it’s wealth management products, an old favourite for developers to raise cash: Highly rated WMP will be prevented from buying junk debt from developers. This addresses the underlying duration mismatch. $400bn in junk debt will need to
Australia’s personality-disordered PM, Scott Morrison, is galavanting around the world drumming up support to contain China. He’s invited himself to the G7 to lace it with anti-CCP warnings. He’s dropped into Downing Street to spray Beijing. He’s soon off to the White House for an anti-CCP powwow. At home, more US marines and naval access
Ever since China installed its “three red lines” policy early this year, there have been increasing signs of stress in China’s mega-development sector. Floor area starts have dropped sharply, equity markets have punished the sector and credit markets begun to tighten the noose on the more freewheeling names. That process continues today as Chin’s greatest
The ferrous complex was well bid on June 11, 2021 for no reason that I can discern beyond my own posting. Spot was firm. Dalian paper jumped overnight. Steel has not updated: Dalian trading started weak yesterday until I posted on Vale’s latest dam troubles. Although it was not news, my reminding the market of
I said recently that iron ore was not going to go to $300 unless we saw some new crisis to supply. Either another busted dam in Brazil or nationalist Indian policy or the like. Well, we have a candidate, via Reuters: Regional Labor Department for the southeastern Brazilian state of Minas Gerais says Vale SA’s decomissioned
Readers will know that we are of the view that China has entered a new round deleveraging and economic restructuring that will crash commodity prices in due course. This plan is two-pronged. It aims to slow the development sector to end overbuilding. And it aims to deleverage local governments as well. I have already discussed
The ferrous complex was firm yesterday with a broad rally on a delayed reaction to Tuesday’s news about more Brazilian mine suspensions. Spot was up. Paper flat overnight. Steel rallied: Chinese port inventories are at 127.65, adequate only: Not much else to say. I still think that the risk of an EOFY sell-off is high
Lordy, already! A few months of three red lines policy and the titans totter. China’s largest property developer, Evergrande, is increasingly on the nose for credit markets: And equity markets: Regulators have instructed Evergrande counterparties to stress test their exposures. Evergrande denies any wrongdoing in its partly-owned Shengjing Bank Co, as well as heavy discounting
The ferrous complex went a bit haywire yesterday with prices all over the joint. Spot jumped. Paper roared overnight. Steel fell: There’s not much new here. We’re just be pushed around within a range. That said, steel mill margins are still getting belted which is a major warning for iron ore going into EOFY. In
Australia’s nemesis, The Global Times, is back today with more Australia bashing: #Australia has good reason to diversify its #ironore exports to #China ASAP. According to Rafael Suchan, CEO of Germany’s Scholz Recycling Group, China’s iron ore imports will be nearly halved by 2030 with the help of steel scrap #recycling. pic.twitter.com/X9mEJmoekD — Global Times