Iron ore prices hit new record highs on Thursday as prices for 62% Fe fines delivered to northern China topped $US200 a tonne for the first time.
The Metal Bulletin’s Fastmarkets website said prices surged as iron ore trading resumed after China’s five-day Labour Day holidays, renewed tensions between China and Australia, along with strong steel prices.
Fastmarkets said the price of 62% fines rose $US9.34 a tonne to $US201.888, the price of 58% Fe fines jumped $US7.27 to $US175.72 a tonne and the price of 65% Fe fines from Brazil leapt $US7.70 to top the $US230 a tonne level for the first time at $US234.70 a tonne
Another measure, the S&P Global Platts IODEX, the spot price of 62% iron- fines delivered to China, was even higher at $202.65 a tonne. That’s up 27% from the end of 2020.
On the Chicago Mercantile Exchange (CME), the most-active May futures contract for 62% iron-ore fines delivered to China was up 5% at $US199.99 a tonne, up nearly 25% since the start of the year.
Global and Chinese steel prices are also running higher – analysts reckon Chinese steel mills are making between $US150 to more than $200 a tonne profit margins because demand continues to be strong because of infrastructure and property spending
June US Midwest domestic hot-rolled coil steel futures, meanwhile, settled at an all-time high of $US1,573 per short ton Wednesday up over 63% higher this year. (That’s helping BlueScope Steel make a motza from its North Star plant in Ohio).
The global iron ore market remains in short supply – Australian shipments to China lagged in the first two months of the year, down by around 12 million tonnes while Brazilian exports in February slumped but recovered in March and April.
In fact Brazil’s iron ore exports increased by 7.49% in April from the same month in 2020, according to the country’s economy ministry
Brazilian iron ore exports totalled 25.79 million tonnes in April compared with 23.99 million tonnes a year before, the economy ministry said.
That was down on the 28.42 million tonnes of iron ore exported in March (which was up from 21.21 million tonnes the year before). Brazil’s shipments to China were up more than 20%.
Also helping drive prices higher is the continuing pollution and capacity crackdown which has boosted demand for higher grade iron ore – specifically the 65% fines from Brazil which are in short supply.
The changes are going to boost the already record profits for steelmakers around the world, especially since they continue to enjoy a surge in prices to historically high levels and high profit margins for steel products.
Fastmarkets say foreign steel companies have already adjusted prices to take account of the rebate cuts because of the record profits.
And those profits are fat – Posco reported a March quarter profit of $US1.3 billion, a decade high, BlueScope in Australia is heading for record underlying profits around $A1.5 billion or more and on Thursday, Arcelor Mittal, the world’s biggest steel maker (outside China) reported its highest quarterly profit in a decade as steel prices soared.
First-quarter earnings before interest, taxes, depreciation and amortisation (EBITDA) totalled $US3.24 billion helped not only by high steel prices but the boom in ioron ore prices. Arcelor exports iron ore from its own mines and said first-quarter EBITDA from iron ore mining more than tripled to $US1.07 billion from year earlier.
Iron ore companies are closely watching tax and tariff changes (which started May 1) which seem to be aimed at boosting higher quality steel production and reducing the cost of many semi-finished steel products.
This would see the amount of crude steel produced in China fall, cutting imports of iron ore and coal in particular 9and doemstic production and consumption of both).
These changes would, by reducing crude steel production and demand for iron ore and coal, reduce pollution by steel companies which is a problem in northern China and especially near Beijing.