A currency shock is being unleashed upon Australia: How high it goes is anybody’s guess. I still say low 82-83 cents with DXY falling further yet as EUR powers on. But everything is sure getting overheated. Dalian is falling: The ASX is staggering under the load. Big Iron is trying but can’t get far: Big
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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FMG is up today in the general excitement over commodities: But its quarterly production report was a bit of a disaster: Fortescue has released its June 2017 quarterly production results, reporting shipments of 44.7 million tonnes (mt) of iron ore. Cash production costs (C1) were a record US$12.16 per wet metric tonne (wmt), a 15
Iron ore price charts for July 25, 2017: Tianjin benchmark jumped $2.80 or 4.2% to $69.70. Paper is at new breakout highs overnight. Steel is holding up. Coking coal is along for the rise. A bunch of positives converged yesterday. Samarco is going nowhere: Brazilian iron ore pellet producer Samarco’s return to operations has been delayed
Tianjin benchmark fell 20 cents to $66.90. Paper took off overnight. Steel is stable. Restock ongoing. From Reuters: Stocks of rebar SH-TOT-RBARINV, mostly used in construction, added 2.34 million tonnes over the last week to 372.7 million tonnes, according to the SteelHome data. That’s ringing the bell at the top.
Iron ore price charts for July 21, 2017: Tianjin benchmark down 20 cents to $67.10. Paper down. Steel is slowing fading. Port stocks are rising again with prices as expected, up 750kt tonnes last week to 140.45mt. I still expect the restock to persist a little while longer but we appear to be at the
Via Morgan Stanley: 1st Take: The Federal Court on July 20, recognized native title rights and interests over a large area of the Pilbara in WA that includes FMG’s Solomon Hub (70Mt of 170Mt production). The company responded to the news stating the decision has no impact on the current and future operations or mining
Iron ore price charts for July 20, 2017: Tianjin benchmark sank $2.20 to $67.30. Paper flamed out and fell sharply overnight. Steel eased. The rally looks cooked to me. We’ll probably bounce around $70 for a while as Chinese mills complete their restock but there’s just no reason to drive it higher here. Supply is flooding
Dalian has just flopped into the positive today: With Big Iron down a little: Big Gas is up a bit as one of Australia’s most evil firms, STO, gouges the entire east coast for better profits: Big Gold is still sickening: Big Banks are trampling the APRA pansies: As Big Liar trades sideways: Another ethicists
Because it sure is taking it for the team. RIO is doing a great job of limiting supply as it finds problem after problem with its fully completed Pilbara 360 iron ore expansion, leaving 30 mt of capacity idle on the shelf: Pilbara operations Pilbara operations produced 157.0 million tonnes (Rio Tinto share 128.7 million
Via China Daily: China’s iron ore demand is expected to see a continuous decline in the next few years, due to growing awareness of environmental protection and increased consumption of scrap steel, experts said. In 2020, China’s iron ore consumption is expected to reach 960 million metric tons, a decline of 150 million tons year-on-year,
Iron ore price charts for July 18, 2017: Tianjin spot climbed $1.30 to $68.20. Paper kept going overnight. Steel has not updated. Coals are powering. We’re off the hook again. At least this time is has some underpinning with Chinese realty holding up well. I has further to run given inventories: Could be another month
The world’s crappest bourse knows a policy error when it sees one. As the Aussie flies on RBA wings today: The ASX200 is down firmly and still sporting a nasty head and shoulders topping pattern with a neckline around 5600: Bond yields are getting hosed: Dalian is going nuts: Big Iron is mostly up but
From RIO: Pilbara operations Pilbara operations produced 157.0 million tonnes (Rio Tinto share 128.7 million tonnes) in the first half of 2017, two per cent lower than the same period of 2016 reflecting adverse weather conditions in the first quarter. Second quarter production of 79.8 million tonnes (Rio Tinto share 65.0 million tonnes) was slightly
Via Morgan Stanley: 2017’s been a tough year for Aussie met-coal: still getting over a Q1 cyclone + now S32’s Appin’s down for a while… Trouble at Appin: Last week (10 July), South32* declared force majeure on coal deliveries from Australia’s Illawarra, after it was directed by the industry regulator to close, due to unsafe
Iron ore price charts for July 17, 2017: Tianjin benchmark pinned its ears back up 2% to $66.80. Paper kept running hard overnight. Same for coking coal. Looks like we’re going to take a run to $70. This time there is justification. Yesterday’s data showed no ill-effects from tightening. Steel output is monstrous: Even if
Iron ore price charts for Friday 14, 2017: Tianjin benchmark fell 20 cents to $65.50. Paper rose overnight. Steel stalled. Coal is still levitating. As expected, Chinese iron ore port stocks resumed climbing last week, up 400kt last week to 139.7mt. It will be interesting to watch port stocks now. The pace at which they
Via Goldman: RIO – precariously balanced RIO has been one of the best performing large-cap mining companies over the past 12 months driven by rising commodity prices, rapid balance sheet deleverage and early mover advantage in capital returns. However, RIO’s fortune remains heavily intertwined with its largest commodity – iron ore. And here is the
Iron ore price charts for July 13, 2017: Tianjin benchmark added 40 cents to $65.70. Paper fell sharply overnight. Steel is firm. CISA production for mid-June boomed to 1.866mt per day, easily an all-time record. This last data point is driven more by reform of the steel market than it is underlying demand (which
Dalian is a little soft today: Big Iron is still firming: Big Gas has all but ignored the oil rebound. Very sensible: Big Gold is marking time: Big Bubble is down despite the steepened Aussie yield curve: Big Liar is threatening a little convergence as high flyers come back and MEA mulls a bottom: Finally,