Iron ore price, page-27813

Thanks for your post in terms of info, though I found it very hard and taxing to read, so I had time time just now to do this.......!

Iron ore price dilemma – Will China actually cut steeloutput? Reuters | February 1, 2021 | 8:06 am Intelligence Top CompaniesAustralia China Latin America Iron Ore (The opinions expressed here are thoseof the author, Clyde Russell, a columnist for Reuters. China’s vast steelsector, and the iron ore industry feeding it, is grappling with a seeminglycontradictory policy impulse that it should produce less this year, even asdemand remains strong amid post-pandemic stimulus spending. SIGN UP FOR THEIRON ORE DIGEST Sign Up China produced a record 1.05 billion tons of steel in2020, helping to drive spot iron ore prices to a one-year peak of $175.40 a tonon Dec. 21. Over the year, prices rose 75%.The spot price of benchmark 62% ironore delivered to North China, as assessed by price reporting agency Argus, hassince retreated back below $160 a ton.

THERE IS ALREADY SOME EARLY SIGNS THAT SEABORNE IRON OREDEMAND IS RECOVERING OUTSIDE OF CHINA, but the price has been above $150 foralmost two months, which is a strong performance considering that thesteel-making ingredient held below $100 for the five years between May 2014 andMay 2019.While China’s record steel output has played its role, global iron oresupply has also been hit by a series of issues in second-largest exporterBrazil, which has suffered disruptions from the Corona virus pandemic, mineclosures on safety grounds and a fire last month at an export terminal.

Top exporter Australia has managed to keep its shipments atrobust levels, but this hasn’t been enough to offset the supply losses fromBrazil and still meet China’s demand. The question for market participants iswhether China will really curtail steel production in 2021, or whether ongoingstimulus spending will triumph as authorities prioritise economic growth overpollution and energy consumption concerns. The official line is that steelcapacity and output should moderate this year.

Industry and Information Technology Minister Xiao Yawingcalled on the steel industry to “resolutely” reduce output and ensure thatthere is a year-on-year decline in 2021, according to a Dec. 29 report fromstate news agency Xinhua. Industry body the China Iron and Steel Association(CISA), however, expects higher steel demand this year amid supportivemacroeconomic policies. To resolve this dilemma of how to cut steel output andstill meet demand, CISA is touting imports as a solution.

“We can strengthen imports of primary steel products,especially billets … so that rising demand can be met without increasingoutput,” CISA Vice Chairman Luo Taejon told a news conference on Jan. 27. IfChina does limit steel output in 2021 and increase imports of steel products,it sets up an intriguing dynamic whereby China’s iron ore imports may dropslightly, while imports by other producers increase by a corresponding amount. Ifthis occurs it could mean iron ore prices remain supported since demand growthin the rest of the world would offset any decline in China’s imports of the rawmaterial. Demand recovery?

There are already some early signs that seaborne iron oredemand is recovering outside of China. Global seaborne deliveries in Januarywere an estimated 125.08 million tons, according to vessel-tracking and portdata compiled by Refinitiv. This figure is likely to be adjusted higher aslate-arriving cargoes are included in the assessment. This was up fromDecember’s 122.67 million tons, and while still just lower than November’s125.18 million tons, marked a recovery from pandemic-induced levels below 120million tons in May and June last year. China’s seaborne imports were estimatedat 93.05 million tons in January, up from 85.35 million in December, accordingto Refinitiv.

Overall the picture that emerges is that global iron oredemand remains solid, and China has yet to show any meaningful signs ofmoderation. There are still some question marks over supply from Brazil, butprobably not as many as there were in 2020. So, does the current situationjustify a price above $150 a ton? History would suggest not.

Certainly the forward curve for Singapore-traded iron orefutures has been slipping in recent weeks, with the six-month contract closingat $138.33 a ton on Jan. 29, down from $146.48 at the start of the month. Ironore inventories at Chinese ports, as monitored by consultancy Steel Home, rosea third week in the period ending Jan. 29, reaching 126.2 million tons, up froma two-month low of 124.43 million in the week to Jan. 8.

It’s a cliché to say a market is finely balanced, but in thecase of iron ore this seems an apt description, with the outlook dependent onwhether the coming months show China is moderating steel production, or if itsmills are still running hard.