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Iron ore prices hurtle to a seven-year high, coking coal prices lag on quotas – Hellenic Shipping News
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…..
Link here to the full Hellenic Shipping News article
- Chinese iron ore futures have surged to fresh record highs on Monday.
- Prices for major iron ore grades closed at or near multi-year highs on Friday.
- The Commonwealth Bank now expects prices will stay higher for longer than it previously forecast, describing the recent decline in Chinese iron ore port inventories as a “major worry”.
- Chinese port stockpiles fell to the lowest level since early 2017 last week, according to data from Mysteel Consultancy.
Chinese iron ore futures continue to soar, climbing again on Monday.
The September 2019 contract on the Dalian Commodities Exchange closed at 763.5 yuan at the mid-session break, leaving it at the highest level on record.
It’s now rallied 74% from late November last year, mirroring similar bullish price action in spot markets over the same period.
On Friday, prices for 58%, 62% and 65% iron ore fines closed at or just shy of multi-year highs, according to Metal Bulletin.
With Chinese futures continuing to soar on Monday, there may well be further gains to come in physical markets when Metal Bulletin releases its daily Iron Ore Index later in the session.
In a note released on Monday, Vivek Dhar, mining and energy commodities analyst at the bank, said he now expects the benchmark spot price for 62% fines to remain higher for longer compared to his previous forecasts.
“While we have always talked about iron ore prices hitting $100 a tonne, supply and demand factors are now aligned enough to justify that outcome for a little while longer,” he said, referring to the chart below showing the bank’s latest forecasts compared to those previously offered.
“We’ve upgraded our iron ore prices by 7% to $92 a tonne in 2019 and 3.5% to $74 a tonne in 2020.”
Dhar said that declining iron ore port stockpiles in China, reflecting record steel production in the nation and iron ore supply disruptions in Brazil, remain a “major worry”.
“The fact that benchmark prices are already around $104 a tonne with port stockpiles around 128 million tonnes means that shortage concerns are likely to intensify as we continue to see port stockpiles fall,” he said.
“Keep in mind that around 120 million tonnes is a ‘safe’ level for port stockpiles and price are surging even before we’ve touched that level.”
According to data from Mysteel Consultancy, Chinese iron ore port inventories have tumbled from 148.9 million tonnes in mid-April to 127.8 million tonnes last week.
Along with disruptions to Brazilian seaborne supply as a result of a deadly mine disaster at an iron ore facility operated by Vale in late January, the decline also reflects strong Chinese demand with crude steel output surging to the highest level on record during April, according to official data released by China’s National Bureau of Statistics (NBS).
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