Iron ore prices for Febraury 29, 2020: The miracle price boomlet goes on. Mills are restocking like zombies, via Bloomie: The collapse in economic activity amid China’s unprecedented measures to contain the coronavirus outbreak means there are few buyers of steel, which has sent prices tumbling and put margins under intense pressure. However it’s difficult
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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Iron ore prices for February 19, 2020: Spot is again struggling versus paper. Different miners are saying different things: Australian miner Fortescue said that its iron ore shipments remain on schedule and that it had not had any issues with customer payments as a result of the coronavirus outbreak in its main market of China.
Coronavirus leads to GDP downgrades The outbreak of the coronavirus has forced downward revisions to our GDP forecasts from our (US, China, & Global) economists (2020e GDP growth -20bp to 2.9%). The downgrades have been most severe in 1) China & 2) Q1 2020. While uncertainty over the severity and duration of the outbreak remains,
Via UBS: Checking in with Platts Steel Raw Material Analysts We hosted Paul Bartholomew (Senior Managing Editor, Steel Markets) and Jeffery Lu (Managing Editor, Met Coal) to discuss their respective markets and COVID-19. While the LT implications of the outbreak remain uncertain, the immediate impact on productivity is becoming apparent. Platts is concerned that the
Via the AFR: “You just have to look at the numbers of Chinese tourists and Chinese students that come to Australia – it’s significant – it’s in the millions,” JPMorgan Asset Management’s head of fixed income Bob Michele said. “Coming off the bushfires, and now with coronavirus, everyone is trying to estimate what the impact
Via BHP just now: Six months ago, at the time of our full year results for the 2019 financial year, an air of prudent caution permeated commodity markets. On balance, events since that time have justified that caution. The result has been a mixed price performance by our key commodities.1 Demand for oil, metallurgical coal and copper was weaker
Via Argus: Chinese steelmakers remain partially blocked from shipping steel and steel feedstocks as a result of transport restrictions across provinces and at ports. Government officials restricted deliveries to slow the spread of the coronavirus, with the most stringent controls in Hubei province, eastern China’s Zhejiang province and neighbouring areas. Beijing has urged businesses to restart,
Iron ore prices for February 13, 2020: The market calmed down a bit. Physical underperforming paper can signal toppyness. Via Reuters: China’s iron ore futures extended gains into a third straight session on Thursday as concerns over supply cuts from Brazil and Australia drove spot prices of the bulk commodity higher, but worries over the
Iron ore prices for February 12, 2020: Spot up strongly. Paper too. Steel less. Is it time for a virus boom? No. But at least there is now an argument for the price strength after Vale confessed yesterday, via the AFR: Vale previously pledged to produce between 68 million and 73 million tonnes of iron
Via Reuters: * The Baltic index, which tracks rates for capesize, panamax and supramax vessels that ferry dry bulk commodities, rose 7 points, or 1.7%, to 418. * The main index slid to its lowest level since March 2016 in the previous session. * Demand has already been hit strongly in China, which accounts for
Iron ore price for February 11, 2020: Spot roared. Paper too. And steel. It’s hard to believe that this is the bottom but who knows? The newsflow is not encouraging, via SCMP: New homes sales declined by 56 per cent year on year in 17 major mainland China cities, including Shanghai and Nanjing, during the
DXY softened last night after its bull run: The Australian dollar lifted on virus hopes: Gold is still hanging in there: Oil was clubbed again: But metals are trying: Miners rebounded: And EM stocks: Junk hasn’t a care in the world: Bonsd were all hosed off: As stocks managed weak gains: Westpac has the wrap:
It’s not clear why but it’s looking pretty excited: There’s no news that I can find beyond some snippets from Brazil: For the first five working days of February, soybean exports declined to 198,600 tonnes per day on average from 263,500 tonnes per day for February 2019, according to Economy Ministry figures. Iron ore exports
Hoocoodanode? The Australian dollar is trading right at the breakdown line: Bonds are bid: XJO is absurdly high for the virus context: Big Iron is beginning to come apart. I’ll take that FMG blowoff day a few weeks ago straight to the pool room: Big Gas free fall: Big Gold is bizarrely unpopulsr: Folks prefer
Via the FT: Copper traders in China, the world’s largest buyer of the metal, have asked miners from Chile to Nigeria to cancel or delay shipments as the deadly coronavirus outbreak hits demand. …“Coronavirus has had a huge impact on copper demand as downstream users [involved in processing raw copper] have stopped acquiring raw material,”
Iron ore prices for 7th February, 2020: Spot up. Paper OK. Steel too. This is the calm before the storm. Or, more accutely, the calm thanks to the storm, Cyclone Damien, in the Pilbara, which has now passed. News via Platts: China’s finished steel consumption in February could be up to 43 million mt lower
Iron ore prices for February 6, 2020: Spot and paper jumped on the tariff cuts but that won’t last. Coking coal is running on feared Chinese supply disruptions. I’m not sure why. Much of Chiense volumes are in the north west which is relatively virus clear. It’s n0t as if trains carry the virus, either.
Iron ore charts for February 4, 2020: A snap back after yesterday is not a surprise. But all questions about demand and supply remain open and tilted bearish, via Mysteel: Tens of thousands of people in China alone are fighting against the virus and no one knows for sure how long the battle will last.
Via Reuters: The capesize component of the Baltic sea freight index plunged to an all-time low on Thursday, hurt by high fuel costs owed to new shipping regulations and a seasonal slowdown worsened by a coronavirus outbreak. * The Baltic index, which tracks rates for capesize, panamax and supramax vessels to ferry dry bulk commodities,
SGX 12 month swaps were up a little yesterday to $74.37: It’s all still guesswork on how much damage is being done to the ferrous complex. Traders have a crack at FMB: Steel Market participants expect the fallout from the virus to have an effect on steel markets for the foreseeable future. “Its logical assumption