The Northern China import price of 62% Fe content ore fell 2.8% on Monday, to a near-one-month low of $89.00 per dry metric tonne according to data supplied by The Steel Index.
After a 85% rise in 2016, the price of iron ore has improved by 12% so far this year and has more than doubled in value since hitting near-decade lows at the end of 2015.
The rise in the price of the steelmaking raw material has flummoxed market observers given supply growth expected in 2017, record-setting inventory levels at ports and an uncertain outlook for demand from China.
The bears received more ammunition over the weekend after inventories at major Chinese ports jumped to 130 million tonnes the highest since at least 2004 according to Steelhome data.
However, Reuters reports the bulk of inventories are low to medium-grade material and the availability of high-grade iron ore remains limited as “most Chinese mills are opting for higher grade iron ore to boost productivity in order to push out more steel as prices remain high.”
The bulk of inventories are low to medium-grade material and the availability of high-grade iron ore remains limited
Iron ore prices should also be supported by news over the weekend that Chinese authorities will enforce crude steel production capacity cuts of 50 million tonnes. The announcement form part of Beijing’s efforts to tackle chronic air pollution and restructure the steel industry which for decades have suffered from overcapacity, inefficiency and low-quality steel output.
The Chines push should favour high-grade ore from Australia, Brazil and other exporting nations over domestic production which is low grade and remains unprofitable even at today’s iron ore price.
On Monday, the market for coking coal continued to rebound with the steelmaking raw material advancing to $163.10 after three weeks of unbroken gains. Met coal prices are being supported by the decision to further cut coal production in China with a goal of eliminating 150 million tonnes this year. While the cuts target coal used in power generation, steel making quality coal will also be impacted.
A reduction in allowable work days at the country’s coal mines last year sparked a massive rally in coal prices, lifting met coal prices to multi-year high of $308.80 per tonne (Australia free-on-board premium hard coking coal tracked by the Steel Index) by November from $75 a tonne earlier in 2016. The price had fallen back to $150 a tonne three weeks ago.
Source – mining.com
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