Iron Ore Moves Higher For Sixth Consecutive Day

By Glenn Dyer | More Articles by Glenn Dyer

Global iron ore prices this week moved back to levels last seen in early March as China’s crude steel production maintain a solid pace after the first four months of 2020.

Prices reached and then moved past the $US90 a tonne level last week for a six-session gain of more than 8%.

But the production data, issued Friday by China’s National Bureau of Statistics, is starting to suggest that the country’s demand for steel might be approaching a peak, given the continuing weakness in the Chinese and global economies and pointers to more of the same over the rest of this year.

Growth in crude steel production in the January-April period this year was barely ahead of the first four months of 2019 – a rise of 1.3% to 319.46 million tonnes (slightly faster than the 1.2% rise for the first quarter) against a 10.1% rise in the first four months of 2019 to 314.96 million tonnes over the same period of 2018.

For April crude steel output rose to 85.03 million tonnes up more than 7% from 78.98 million tonnes in March and 0.2% higher than in April 2019 when output was a smidge over 85 million tonnes.

Reuters said that the average daily output last month rose 11% to 2.83 million tonnes from the more than one-year low of 2.55 million tonnes in March. April’s daily production was the highest since June of last year.

Analysts say April’s rise was not a surprise as the month is usually a traditional peak for steel consumption in China. This year it has been aided by stimulatory packages that have boosted the domestic steel mills’ confidence in ramping up output.

The MySteel website pointed out that China’s domestic steel prices are “still far lower than a year ago, as total stocks of the five finished steel products comprising rebar, wire rod, hot-rolled coil, cold-rolled coil and medium plate held by traders in the 35 Chinese cities totaled 18.8 million tonnes as of April 30, up 51% on the year despite a 20.1% on-month drop.”

Iron ore stocks meanwhile continue to fall and were just under 102 million tonnes last year, down nearly 22 million tonnes from the same week a year ago.

Seaborne supplies have reportedly been tight because of constraints in Brazil and in the Pilbara where BHP and Rio Tinto is now back at normal pace after the impact of cyclones in the first quarter

That’s despite a solid rise in iron ore imports in April to 97.27 million tonnes, up from 85.91 million tonnes in March and 80.77 million tonnes a year earlier.

In fact imports in April of 2019 hit an 18 month low because of the shortfall from Brazil.

There are growing fears that irn ore shipments from Brazil will be constrained by the country’s failure to control the spread of COVID-19 and the growing pace of lockdowns, especially in the northern iron ore mining region.

In the first four months of 2020, China imported 360 million tonnes of iron ore, up 5.8% from 340.21 million tonnes in the same period last year, according to customs.

That’s a sharp rise in the pace of imports from the 1.3% increase reported for the first quarter.

Global prices held firm above $US80 a tonne over April and last week moved above $US90 a tonne for the first time since the first days of March (when the lockdowns in China were on the verge of being relaxed).

The price of 62% Fe fines shipped to northern China rose 3.8% last week to $US91.60. That was after a 5.4% rise the week before.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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