What Is Catapulting The Iron Ore Prices High?

What Is Catapulting The Iron Ore Prices High?

Iron ore prices rose again over the supply shortage in the global market. The benchmark Iron ore fines 62% Fe (CME) rose from its recent low of $89.50 (Day’s low on 1st April) to the present level of $93.79. The rise in iron ore prices is mainly due to the supply shortage in the market amid cyclone impact in Pilbara region, which caused a significant production loss from miners operating in the region such as Rio Tinto (ASX: RIO) and BHP Billiton (ASX: BHP).

Production loss from these significant minors coupled with production loss declared by the mammoth Brazilian Vale led to a supply shortage in the global market, which in turn, supported the prices of iron ore in the global market.

As per the data, the import of iron ore across the 35 ports in China declined, and delivery from those ports increased significantly amid high demand from mills in China.

The Iron ore inventory across the 35 ports in China stood at 131.93 million tonnes for the week ended 12th April 2019, 3.91% down as compared to previously reported inventory. The iron ore stocks across the Chinese ports declined to 5.36 million metric tonnes as compared to a week ago and by 15.83 million metric tonnes as compared to a year ago (as on 12th April 2019).

The shortfall in inventory across the ports was possibly attributable to the less export from Australia amid production loss and port activities suspension at Port Hedland.

On the demand side, the demand across mills in China is on a surge amid high steel demand in the domestic market and less steel supply. Chinese mills are expected to ramp up the production in April to support the falling steel inventory in China and take advantage of high steel prices in the domestic market. The steel supply is China diminished amid suspension on mills sintering and furnace activity due to the high pollution level across various provinces in China such as Hebei.

Apart from the suspension in few provinces, Qingming provinces, which is among the top producing marked a holiday, which further reduced the steel inventories (both social and mills) in China, which in turn, prompted mills across these provinces to ramp up the production after recommencing the operations during late March.

As per the data, daily average deliveries across the ports increased and stood at 2.64 million (as on 12th April), 157,000mt up as compared to the week ended on 5th April. The high delivery from these ports signified an increase in demand, which in turn, supported the iron ore prices.

In a nutshell, supply shortage coupled with high demand in China is catapulting iron ore prices in the global market.

The high prices of iron ore also supported the major iron ore miners on the Australian Stock Exchange (ASX), and the share prices of miners such as Rio Tinto sustained above $100, and share prices of BHP Billiton reached closed to its 52-weeks high of A$40.130 (Day’s high on 8th April 2019).


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