Global iron ore prices exceed $76 level

Monday, 21 January 2019 17:42:49 (GMT+3)   |   Istanbul

Having continued to increase during the past week and closed the week with an upward movement of 1.23 percent, prices of ex-Australia iron ore with 62 percent Fe content for delivery to China’s Qingdao port have increased by $0.3/mt on Monday, January 21, as compared to the closing price at the end of last week, starting the current week at $75-76.1/mt CFR China.

Last week, while Chinese buyers were seeking to make import iron ore bookings ahead of the Chinese New Year holiday (February 2-10), Australia-based miner Rio Tinto declared force majeure on its iron ore shipments to certain customers who had made contract bookings, due to the fire at its Cape Lambert export terminal. Since iron ore shipments to be made from Australia in January have been negatively impacted by this situation, Chinese buyers will have to buy iron ore from their domestic spot market, according to market sources. However, in the short term, it will very difficult to obtain iron ore cargoes from the spot market which will be able to compensate for the volume of iron ore shipments which were interrupted in Australia. Impacted by these problems in terms of supply, global iron ore prices moved upwards last week.

Meanwhile, following their recent purchases of high volumes, Chinese mills have gradually decreased their bookings of iron ore with 65 percent Fe content, as they have been leaning instead toward low quality iron ore bookings as a result of their reduced profit margins. Accordingly, the price gap between the different grades of iron ore has decreased. Amid weak steel prices in the global market, Chinese mills are expected to continue to purchase low quality iron ore in order to reduce their production costs. 

Late last week, United States Treasury Secretary Steven Mnuchin stated that the lifting of some or all tariffs imposed on Chinese imports is under discussion. The news has created the perception that trade tensions could end and that global trade could return to normality. As a result, the Chinese steel futures market moved upwards and global iron ore prices increased by 1.47 percent on the last day of last week.

This week has started with news regarding Chinese economic growth. According to the announcement made by the Chinese National Bureau of Statistics, China’s economic growth was recorded at 6.4 percent in the last quarter of 2018 and at 6.6 percent for the full year of 2018, the slowest growth rate of the last 28 years. Accordingly, the Chinese authorities will have to take more steps in order to support the national economy. However, this situation has not impacted global iron ore prices, which have started the week with an upward movement with the support of rising iron ore futures prices.


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