National Committee for Development and Reform announced that we are ready to launch futures for iron ore in Beijing, China.
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Iron ore prices have risen this year after many years as the Chinese government promotes infrastructure cuts, and commodity prices themselves rise amid a global pandemic.
Spot iron ore prices rose Tuesday to $ 130 a dry metric ton, according to agency Argus. This is the highest level since 2014.
“Stimulus measures in China and other countries have played the pivotal role in reviving economic activity and, with it, demand for commodities,” ANZ research strategists Daniel Hynes and Soni Kumari wrote in a report on Wednesday.
The ongoing rally in iron ore prices comes after the price of the steel-making ingredient plummeted to a trough of $ 80 per tonne in March.
The strong gains come after Beijing pumped hundreds of billions of dollars of fiscal stimulus into its economy to help it bounce back from the coronavirus pandemic. Many of these incentives would go into infrastructure.
In July, China imported a record 112.65 million metric tons of iron ore, up 24% from a year ago and up 10.8% from June, according to customs data.
China imported 11.8% more iron ore in the first seven months of this year compared to the same period in 2019, Reuters calculations show. China also produced a record amount of raw steel in July.
“Bulk commodities are benefiting from investment in infrastructure in China. Steel production has been surprisingly strong and improvements in steel mill margins should keep exports short in the short term,” the ANZ strategists said in their note. An exhausted iron ore slag also helps, the bank added.
Concerns about supply from Brazil
Iron ore prices are also supported by concerns about Brazilian supply, as the major producer is also a hotspot of coronavirus. A dam disaster in 2019 had also hit supply.
“Continued concerns about Brazil’s iron ore supply as coronavirus cases and deaths continue to plague the country’s mining areas, the price of iron ore has impacted along with strong Chinese demand as steel production began to heat up with the V -shaped recovery of the country, “Fitch Solutions said in a Aug. 14 report.
However, the price rally of iron ore cannot be sustained, ANZ said. “We are seeing iron ore prices normalize as the seasonal delay in construction activity begins,” the bank’s strategists said in another August 12 report.
Fitch Solutions said it expects prices to continue to rise until 2021 before declining modestly.
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