Via RIO: Pilbara operations Third quarter production of 87.3 million tonnes (Rio Tinto share 72.2 million tonnes) was 6% higher than the same quarter of 2018 and 10% higher than the previous quarter. This reflects a solid performance in the mines, with actions progressing as planned. Our increased focus on waste material movement and pit
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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Texture from Reuters: Concerns about iron ore demand slowing in China, which makes about half of the world’s steel output, due to its renewed efforts to curb pollution by restricting steel mills operations in some areas also weighed on prices. Vale, the world’s top iron ore exporter and China’s major source of high-grade material, on
Via Vale: Rio de Janeiro, October 14th, 2019 – Vale S.A (“Vale”) iron ore fines production and sales had a significant increase in 3Q19, as a result of the continuous progress in the resumption of operations in the Southern and Southeastern Systems and also due to the strong operational performance and shipments normalization in the
Texture from Reuters: Benchmark Dalian iron ore and coke futures slumped more than 2% in late trade on Monday following growing concerns about demand for the steelmaking raw materials, amid China’s renewed efforts to curb pollution by restricting steel mills operations. “Traders have been wary of the impact of ongoing restrictions on steel mills in
Texture from Reuters: “The combination of weak demand and relatively high supply is weighing on steel prices,” said Richard Lu, senior analyst at metals consultancy CRU in Beijing. Reports that China’s top steelmaking city of Tangshan has issued new anti-pollution restrictions on mill operations, effective from Oct. 10 up to Oct. 31, did not help
While various Aussie China apologists use signing up to China’s One Belt, One Road as some kind of talisman to ward off the evil of arguing with Beijing, the truth is OBOR is already cooked. Recently UBS noted that: BHP stopped short of saying exactly when China would hit peak steel, choosing to say that
Texture from Argus: “Steel mills in Tangshan have received the notice and started shutting down production. These set of restrictions are even stricter than the September restrictions,” said the manager of a Tangshan-based mill. “Restrictions will support steel prices. Iron ore demand may not fall significantly as sintering has been under controls of varying extents
Via The Australian comes the oligarchs: Fortescue Metals Group boss Elizabeth Gaines has warned that China will look to develop alternative iron ore supplies outside the Pilbara if Australia neglects its relationship with its biggest trading partner…Ms Gaines said the Australian business community needed to maintain its influence in public debate on political policies. “The
Texture from Reuters: Steel inventories in China stood at 11.4 million tonnes as of Oct.7, up 594,100 tonnes compared with the week ended Sep. 26 but still the second lowest since late June, according to data from consultancy Mysteel. “Output curbs have eased after the National Day holiday, which piled pressures to (the) supply side,”
Texture from Reuters: Steel sales in China, however, have softened as growth in the machinery sector slowed, while the offset from infrastructure has not been sufficient, Westpac analysts said. “The Chinese administration clearly stated at the July Politburo economic meeting that property will not be used to boost growth this time so this significant part
Recently even BHP was bearish about it: BHP stopped short of saying exactly when China would hit peak steel, choosing to say that it was plateauing and would peak sometime in the 2019-2025 timeframe. One Belt One Road (OBOR) was seen contributing to 1% pa growth in Chinese steel demand while domestically demand is flat.
Via UBS’ Glynn Lawcock: BHP painted a not too rosy a picture for the global economy saying it thought the business cycle had peaked with autos and semi-conductors putting a big hole in Europe and Japan growth while China policy is only helping to offset but not add to growth. Essentially BHP pointed to weak
Texture from Reuters: China will “continue to implement a prudent monetary policy and increase the strength of counter-cyclical measures”, the central bank said in a statement on Sunday. expect more policy easing/stimulus measures, including medium-term lending facility rate and reserve requirement ratio cuts through the rest of this year to stabilise market sentiment and bolster
Texture from Reuters: “The rebound in the futures markets is just sentiment-driven,” a Shanghai-based trader said. “It’s very quiet now in the physical market because of the upcoming holiday.” Cities surrounding Beijing have imposed routine output curbs on steel mills, coking coal producers and other industries to improve air quality as the nation prepares to
Texture from Reuters: Prices of seaborne thermal and coking coal in China have declined by around 30% year-on-year, mainly driven by reduced demand, said Helen Lau, metals and mining analyst at Argonaut Securities. China’s coking coal purchases, meanwhile, have been “quite strong”, surging 20% to 53 million tonnes in the first eight months of this
Via Bloomie: China isn’t in a rush to add massive monetary stimulus, in contrast with other central banks around the world, and must maintain a prudent policy stance, central bank Governor Yi Gang said. Overall financial risks are contained and those in the shadow banking sector and some key institutions have been resolved, said Yi,
Texture from Reuters: Cities surrounding Beijing have imposed routine output curbs on steel mills, coking coal producers and other industries to improve air quality as the nation prepares to celebrate the 70th anniversary of the founding of the People’s Republic on Oct. 1. China’s northern regions are facing a sustained period of pollution for at
A few thing are beginning to break as bulk commodity alarms go off. The thermal and coking coal crashes have claimed Whitehaven: Goldman Sachs has cut its target price for Whitehaven Coal by 7 per cent after the coal miner’s inaugural investor day. The target price was cut to $2.70 a share from $2.90 a
Texture from Reuters: China steel futures rose on Monday, rebounding from a two-week low on falling inventory and fuelled by tightening output curbs in smog-prone cities pledged by the environment regulator ahead of the heating season. …Steel products’ stockpile in China dropped for the sixth week to 11.4 million tonnes in the week ended Sept.20
This is the problem, via SCMP: China’s spending on railways, a key driver for growth in the last decade, tumbled in August – in part because all major towns are now covered by the country’s extensive railway network. China’s economic planning agency said on Wednesday that railway fixed-asset investment was 449.6 billion yuan (US$63 billion)
Texture from Bloombergo: “Iron ore fell sharply on subdued demand,” said Commonwealth Bank of Australia analyst Vivek Dhar. Mills’ restocking ahead of China’s week-long national holiday that starts Oct. 1 is closing, and concerns over steel demand in the fourth quarter have caused margin volatility, he said. …As winter approaches, traders are also assessing the
Goodbye Budget. Via Mining: The Australian export price of metallurgical coal (FOB hard coking coal Fastmarkets MB) used in steelmaking tanked 7% to $122.50 a tonne. That’s down almost $70 a tonne compared to the start of the year. Fastmarkets MB in a market report says the availability of ample cargoes of lower quality seaborne
Texture from Reuters: Investors are cautious as prospects of China’s economy remain uncertain, a Shanghai-based trader said. Demand can be maintained at the current level but is unlikely to grow further, said the trader, adding that supply of iron ore is relatively sufficient now. The question is not underlying demand. It is weak. The question
Texture from Reuters: “Market will further evaluate the impact on steel products’ consumption and output from the coming National Day holiday,” Huatai Futures wrote in a note, adding that the underperformance of the newly launched iron ore futures contract based on new delivery rules also affected sentiment. That’s about it right now as Beijing seeks
Via S&P today: Global light vehicles sales fell by 6.4% in the year to June 30, 2019. Sales declined in all major markets with the exception of Central and Eastern Europe, which saw a slight pick-up of 0.5%. In light of current conditions, global auto manufacturers’ hopes for a sharp increase in sales in the
Texture from Clyde Russell: Is it time to challenge the conventional wisdom in iron ore and steel markets that poor Chinese economic data is actually good news because it means Beijing will ramp up stimulus spending, thereby boosting demand? The current thinking of ‘bad data equals good news’ was on display this week, with steel
Texture from Reuters: Monday’s data followed downbeat remarks by Chinese Premier Li Keqiang, saying it is “very difficult” for the domestic economy to grow at 6% rate or more because of the high base from which it was starting and the complicated international backdrop. The dismal industrial output figures raised the likelihood of further stimulus
Texture from Reuters: Financial markets in China are closed on Friday for the nation’s Mid-Autumn Festival. Amid declining iron ore seaborne arrivals, purchases of the material may pick up due to some restocking demand of steel mills ahead of the country’s National Day celebrations in early October, said Richard Lu, senior analyst at metals consultancy
Texture from MySteel: China’s imported iron ore prices are likely to remain buoyant for the immediate future, thanks to additional procurements many steelmakers are undertaking ahead of the upcoming National Day Holiday over October 1-7, according to market sources on Wednesday. “Iron ore prices may remain relatively strong short-term, because there are still many mills