For the key steelmaking ingredients of iron ore and coking coal, it was a tale of two different markets this week.
The price of iron ore punctured the $US120 per tonne ($164.70/tonne) barrier this week, its highest since early 2014
This was on account of a stronger market for steel in China which is targeting massive investment in its infrastructure.
For the 62 per cent grade iron ore fines product, spot prices were transacting around $US121.75 per tonne, according to Metal Bulletin.
A week ago, iron ore cargoes delivered to ports in China were trading around $US116.85 per tonne, the price reporting agency said.
There are market indications that China’s demand for iron ore will remain strong over the course of the economic cycle.
A dozen Chinese steel companies have struck long-term supply agreements with Fortescue Metals Group (ASX:FMG).
The deals were agreed on the sidelines of the China International Import Expo and included FMG shareholder, Hunan Valin Iron & Steel Group.
Other steel firms in China such as Baotou Iron & Steel Group, and Rizhao Steel also signed agreements for FMG’s iron ore.
“China’s steel industry continues to outperform expectations, with crude steel production in the nine months to September 2020 reaching 782 million tonnes, and annual steel production expected to exceed 1 billion tonnes in 2020,” FMG chief executive Elizabeth Gaines said.
Prices for steel products in China climb on rising demand
Steel product prices in China are starting to rise, as are futures prices for hot rolled coil and reinforcing bar in China.
The price of steel reinforcing bar (rebar), which is used in construction and concrete, rose to $US605 per tonne, this week.
This is up $US22 per tonne on a week ago, according to reports.
Fresh environmental restrictions on steel plants in Tangshan are also creating demand for higher-grade iron ore.
Higher quality iron ore commands a higher price in the seaborne market, and the cost flows through the supply chain to consumers; in this case, steel mills in China.
Iron ore shipments to China are on a roll
China’s imports of iron ore increased in October to 106 million tonnes, representing a rise of 15 per cent on-year.
“China’s demand for iron ore imports has increased on the back of strong steel demand and positive steel mill margins,” said analysts at Commonwealth Bank of Australia in a report this week.
Beijing has primed its economy with stimulus money to offset a decline in activity from COVID-19 restrictions earlier in the year.
“China’s infrastructure sector has led China’s steel demand growth due to policy support after COVID-19,” said the analysts.
Meanwhile, Brazil’s iron ore shipments to China have started to increase again after hitting a seven-month low.
Port-side stockpiles of iron ore in China have risen to 129 million tonnes as of last week…..
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