Iron ore prices pressed higher this week as the engine of the Chinese economy roared back to levels seen before the COVID outbreak.
The price of iron ore catapulted to $US124 per tonne ($169.35/tonne) this week, as demand continues to surge in a supply constrained market.
“Iron ore prices have recently reached a six-year high, as Chinese iron ore imports also surged to a new high of 322 million tonnes in the September quarter, and Chinese steel production remained above 90 million tonnes per month during May-September 2020,” said S&P Global Ratings analyst, Minh Hoang.
“Current prices have been primarily tied to resurgent Chinese steel demand from the ramp-up of industrial activity post-COVID-19,” said Hoang.
For the 62 per cent grade iron ore fines product, spot prices were transacting around $US124 per tonne, according to Metal Bulletin.
A week ago, iron ore cargoes delivered to ports in China were trading around $US121.75 per tonne, the price reporting agency said.
Iron ore prices remain well supported into 2021
S&P Global Ratings expect prices for iron ore cargoes to begin to moderate to around US$85 per tonne later in 2021.
“We see prices likely to remain supported into early 2021, particularly as Chinese steel mills move into seasonal re-stocking ahead of Chinese New Year,” Hoang said.
Supply of iron ore from Brazil’s mines has been affected by the COVID pandemic, but is starting to recover, analysts said.
“Brazil has been boosting its production output after being hit hard during the height of the COVID-19 pandemic,” said Hoang.
“Vale’s September quarter production surged 31 per cent, or 21 million tonnes, to reach 88.7 million tonnes in the September quarter; however, this remains below the circa 96 million tonnes run-rate Vale was able to achieve prior to its dam failure,” said Hoang.
“We continue to expect Vale”s idled capacity to incrementally return to the market, and together with new capacity coming to the market elsewhere, this could take some steam off iron ore prices over the next two years,” added the S&P Global Ratings analyst.
Source : https://stockhead.com.au/resources