Home » Cadence Minerals (KDNC) » Reuters – Iron ore outlook is finely balanced as supply picks up, China demand holds up

Reuters – Iron ore outlook is finely balanced as supply picks up, China demand holds up

by Clyde Russell

The price of iron ore is increasingly poised between a recovery in supply from exporters and still-robust demand from top importer China on the back on stimulus spending driving steel consumption.

The return of supply, particularly from number two shipper Brazil, would in normal circumstances be a bearish indicator. But if 2020 has shown one thing, it’s that it’s a mistake to underestimate the impact of Beijing’s efforts to boost the economy in the aftermath of the novel coronavirus.

The spot price of benchmark 62 percent iron ore for delivery to north China, as assessed by commodity price reporting agency Argus, closed at $123.05 on Sept. 30, just ahead of a Chinese holiday week.

While this is down from the peak so far this year of $130.55 a tonne, hit on Sept. 9, it also represents a surge from the recent low of $114.45 on Sept. 23.

Iron ore is up 35% from the end of last year, and has been above $100 a tonne since late May, apart from a brief dip below in early June.

While the economic lockdowns imposed in China in the first quarter of the year to combat the spread of the coronavirus did hit prices, since then the trend has been largely a one-way rally.

Part of the story was worries over exports from Brazil, and to a lesser extent from number three exporter South Africa, given that both these countries were hit hard by the coronavirus.

However, there are signs that Brazil’s exports are recovering to pre-coronavirus levels, with Refinitiv vessel-tracking and port data showing shipments of 32.7 million tonnes in September.

The official data was even more bullish, showing exports of 37.86 million tonnes in September, up 18.7% from the same month a year earlier.

The Refinitiv data showed September shipments slightly below August’s 35.4 million tonnes, but well up from January’s 20.8 million, 21.3 million in February and 22.9 million in March.

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