Singapore/Shanghai — Iron ore’s bullish momentum has
continued into 2017 as prices rally to a two-year high amid speculation
that China’s demand for overseas ore will hold up even as the world’s
largest miners bring on new capacity.
Ore with 62% content in Qingdao in China climbed 3.9% to $83.65 a dry metric ton, according to Metal Bulletin. The commodity has risen 6.1% so far this year after surging more than 80% last year.
Iron ore has more than doubled since bottoming in December 2015 amid better-than-expected consumption in China after government stimulus. The latest upswing is supported by signs that policy makers in the world’s top steel-making country are redoubling their efforts to clamp down on outdated mill capacity, lifting steel prices and buttressing iron ore.
The advance came even as banks, including Barclays, outline the case for weaker prices later in the year, and as Brazil’s Vale starts up output at its largest mine.
"One of the major factors driving iron-ore prices at present is the greater emphasis by Chinese authorities on high-end steel products," said Gavin Wendt, founding director and senior resource analyst at MineLife. "The balance of production is shifting toward premium steel products. China requires more imported iron ore from Brazil and Australia to meet its requirements."
Earlier in Asia, SGX AsiaClear futures in Singapore jumped 6.4% to $82.12 a metric ton, the highest level since October 2014, as the most active contract in Dalian soared 7.6%. Rio Tinto Group rose 2.4% in London while BHP Billiton added 0.9%.
Figures on Friday showed China imported a record 1.024-billion tons in 2016, up 7.5% from a year earlier, with most cargo from Australia and Brazil, the world’s top shippers. Purchases last month added up to about 89-million tons, compared with 96.3-million tons a year earlier. More supply is on the way, and stockpiles at ports in China are already at a record. In Brazil, Vale has been loading the first ore from its new S11D mine since Thursday, according to North Port operations manager Walter Pinheiro Filho. The $14bn venture is the industry’s largest project.
Iron ore will probably retreat later this year as seaborne supply expands and demand plateaus or eases, according to Barclays. New York-based analyst Dane Davis said current levels were not sustainable.
"Our key call, and the message we’re putting forward, is that the $80 price level does not represent a new normal for iron-ore prices; instead it’s a temporary blip," said Davis. "I’m an analyst, not a psychic. But I do think over time that demand should start to slow down."
Bloomberg/BDlive
Ore with 62% content in Qingdao in China climbed 3.9% to $83.65 a dry metric ton, according to Metal Bulletin. The commodity has risen 6.1% so far this year after surging more than 80% last year.
Iron ore has more than doubled since bottoming in December 2015 amid better-than-expected consumption in China after government stimulus. The latest upswing is supported by signs that policy makers in the world’s top steel-making country are redoubling their efforts to clamp down on outdated mill capacity, lifting steel prices and buttressing iron ore.
The advance came even as banks, including Barclays, outline the case for weaker prices later in the year, and as Brazil’s Vale starts up output at its largest mine.
"One of the major factors driving iron-ore prices at present is the greater emphasis by Chinese authorities on high-end steel products," said Gavin Wendt, founding director and senior resource analyst at MineLife. "The balance of production is shifting toward premium steel products. China requires more imported iron ore from Brazil and Australia to meet its requirements."
Earlier in Asia, SGX AsiaClear futures in Singapore jumped 6.4% to $82.12 a metric ton, the highest level since October 2014, as the most active contract in Dalian soared 7.6%. Rio Tinto Group rose 2.4% in London while BHP Billiton added 0.9%.
Price gains
"Fundamentals do not explain the full price movement since last week, and that’s why I think speculation is playing the main role," said Di Wang, an analyst at researcher CRU Group in Beijing. Steel and iron-ore futures climbed last week after the government vowed to continue capacity cutting.Figures on Friday showed China imported a record 1.024-billion tons in 2016, up 7.5% from a year earlier, with most cargo from Australia and Brazil, the world’s top shippers. Purchases last month added up to about 89-million tons, compared with 96.3-million tons a year earlier. More supply is on the way, and stockpiles at ports in China are already at a record. In Brazil, Vale has been loading the first ore from its new S11D mine since Thursday, according to North Port operations manager Walter Pinheiro Filho. The $14bn venture is the industry’s largest project.
Iron ore will probably retreat later this year as seaborne supply expands and demand plateaus or eases, according to Barclays. New York-based analyst Dane Davis said current levels were not sustainable.
"Our key call, and the message we’re putting forward, is that the $80 price level does not represent a new normal for iron-ore prices; instead it’s a temporary blip," said Davis. "I’m an analyst, not a psychic. But I do think over time that demand should start to slow down."
Bloomberg/BDlive
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