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Iron Ore Above $90 as China’s Growth Fuels Imports

By Jesse Riseborough

July 20 (Bloomberg) -- Cash prices for iron ore delivered to China, the world’s biggest buyer, climbed above $90 a ton for the first time this year as rebounding growth in the Asian nation drove imports.

Iron ore for immediate delivery advanced 4.6 percent to $91 a metric ton in the week ended July 17, the highest since Oct. 10, according to Metal Bulletin prices for the so-called 63.5 percent grade of material.

China’s economy, the third-largest in the world, grew 7.9 percent in the second quarter from a year earlier fueled by a 4 trillion yuan ($586 billion) government spending program. Iron ore imports jumped 29 percent in the first half as mills expanded output. Prices gained even as China detained four executives from Rio Tinto Group, the second-largest iron ore exporter, on July 5 for allegedly stealing state secrets.

“We are seeing a lot of seaborne iron ore going into China,” said David Flanagan, managing director of Australian iron ore exporter Atlas Iron Ltd., in an interview. “We are seeing growth numbers coming out of China looking really good; we are seeing growing confidence globally.”

China imported 55.3 million tons of iron ore last month, the second-highest behind April’s record of 57 million tons. The country is boosting shipments on the cash market because of the “breakdown” in talks for a benchmark price between steelmakers and foreign producers, Citigroup Inc. said July 17.

Benchmark breakdown

China’s arrest of Rio Tinto’s Stern Hu is related to a criminal probe into iron-ore price talks, not espionage, and the case may result in a decision to charge the mining executive, Australia’s foreign minister Stephen Smith said yesterday.

Qin Gang, China’s foreign ministry spokesman, said July 9 that Hu was suspected of “stealing Chinese state secrets for foreign countries.” Rio has denied the allegations against Hu, who manages the company’s iron-ore business in China, and the three other employees, who are Chinese nationals.

“We believe the breakdown in the benchmark system is being accelerated by recent developments,” Citigroup analysts Alan Heap and Alex Tonks said in their report. “The Chinese iron ore market will likely operate with increased spot volumes and shorter term contracts.”

ArcelorMittal and Nippon Steel Corp., the world’s two largest steelmakers, have announced plans to restart blast furnaces as demand begins to recover.

“We are starting to see another blast furnace or two being turned on in places like Japan, Korea and Europe so when we start seeing some of that seaborne iron ore moving to those places, we might see things tighten up again,” Atlas’s Flanagan said July 17. “It feels like it’s heating up.”

Perth-based Atlas, which started iron ore shipments to China last year, gained 0.3 percent to A$1.795 at 3:55 p.m. Sydney time on the Australian stock exchange. Fortescue Metals Group Ltd., Australia’s third-largest iron ore exporter, jumped 9.2 percent.

To contact the reporter on this story: Jesse Riseborough in Melbourne at [email protected];