Iron Ore Price achieves a New Benchmark, Moves to CNY1,394 a tonne

Summary

  • Iron ore futures on the Dalian commodity exchange for the first time in history surged past CNY1,300 a tonne level and peaked at CNY1,394.5 a tonne.
  • The Australian and the New Zealand dollars surged to 10-year highs against their US counterpart on the back of stronger commodity prices.
  • China withdrew the previously offered export rebates on many steel products and reduced the import tariffs on crude, scrap, or semi-finished steel.

Iron emerges as the latest commodity to set new record levels following the trend set by copper, palladium, and lumber in the recent days. Iron ore futures surged more than 10% to move to record levels amid strong demand for steel precursor in China and critical supply concerns.

Iron ore futures (DCIOC1) on Dalian commodity exchange against 20-session moving average Source: Eikon Refinitiv

Iron ore futures on the Dalian commodity exchange for the first time in history surged past CNY1,300 a tonne level and peaked at CNY1,394.5 a tonne. The 1-month futures instrument finally closed at CNY1,372 a tonne.

Also Read: Iron ore rally lights a fire under ASX-listed miners

The metal traded 10% higher on the Dalian commodity exchange as iron monger steel mills bought iron ores to fulfil their needs. In recent days, China has been focussing on cutting down its steel production to curb the rising environmental concerns.

The Asian superpower has set up an ambitious goal of a net-zero carbon economy by 2060. In a major shift to its policies, China withdrew the previously offered export rebates on many steel products and reduced the import tariffs on crude, scrap, or semi-finished steel.

Read Here: Australian iron ore exports to hit record levels in 2020-21: Govt report

The biggest benefactors of the iron price rally would be the largest exporters, including Australia and Brazil. The higher price allows miners to secure higher realised prices for the iron ore products for their products.

Inflation Makes Global Economy Worried

When we talk about the commodity markets, Crude oil is undoubtedly the largest commodity, affecting prices of almost all articles. Similarly, higher iron ore prices and steel prices in tandem will affect the economics of literally every infrastructure or construction project while the global economy continues its struggle to recover from the pandemic.

Source: © Johncarnemolla | Megapixl.com

Japan, Brazil, and India, the second most populous country, are observing a major upsurge in the infection rates of the mutating virus. India holds one of the largest vaccine production capacities worldwide, and the rising infection rates have led the government to put a hold on the export of coronavirus vaccines.

Good read: Rio Tinto’s (ASX:RIO) 2020 Annual Report Marked by Strong Performance

While the rally in the commodities seems to be working well for miners, the inflation clouds have begun to shape up. Well, the people are fighting against the pandemic, the rising inflation may open another front for the ongoing crisis. The Australian and the New Zealand dollars surged to 10-year highs against their US counterpart on the back of stronger commodity prices.

Interesting read: FMG, BHP, and RIO Fly High on Soaring Iron Ore Prices

Australian iron ore miners have been benefitting from the iron ore rally. Some of the largest players, including BHP Group (ASX:BHP, NYSE:BHP), Fortescue Metals Group (ASX:FMG) and Rio Tinto (ASX:RIO) have also reflected similar rally in respective stock prices.


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