Any doubts that the iron ore price boom was over were buried on Friday as prices fell to multi-month lows, causing losses of up to 25% since the all-time highs of mid-May
The Fastmarkets index price of the metal bulletin closed on Friday at $ 181.57 per ton for 62% Fe fines shipped to northern China, 7.6% less than Thursday, its lowest level since -ril.
It also fell 9.8% for the week and 15% for the month.
Iron ore prices fell below $ 200 a ton for the first time since late May on Thursday and then plummeted on Friday.
Similarly, the 58% Fe fines (which Fortescue Metals still depends on) fell to $ 146.61 per ton, a weekly loss of more than 11%, nearly 19% for the month.
And the 65% particulate matter product from Brazil was also hammered, closing at $ 214.40 a ton, down 6% for the day (it’s still in demand for its higher iron content) and nearly 9% for the week. In July, the price was down $ 347.50 a ton, or 15%.
Traders said prices, which had trended almost downward for the past fourteen days or so, finally broke on Friday, heavily under the weight of China’s continued efforts to reduce steel production in line with its decarbonization course, as well as the slowdown in domestic demand and the price weakness fell.
Sing -ore futures fell 4.5% to $ 182.10 per ton (representing 62% iron ore) and lost around 8% over the week. Prices in Dalian, China fell more than 8% for the day and month, recording their largest monthly decline in 18 months.
China has urged mills to limit this year’s crude steel production to no more than 2020’s volume (1.065 billion tons) after production increased nearly 12% year over year in the first half of the year.
The Shagang Group, the world’s fourth largest steel mill, announced this week that it is curbing production and sales overseas to meet government efforts to reduce emissions. It won’t be the last one where other companies have reportedly already cut production.
However, traders say steel prices will rise in the next month or so as construction companies find supplies are scarce – especially for rebar (which is used as reinforcement in construction), long products, and hot rolled coils.
The government, through its efforts to reduce pollution and carbon emissions, could potentially seek to control a rise in steel prices at the wrong time as the pace of economic growth continues to slow compared to the last few months of 2020 and the beginning of the year .
Government attempts to limit production began in March and had no effect as crude steel production rose 12% from the low levels seen in the first half of 2020 hit by Covid.
To hit the limit of 1.065 billion tons maximum by 2020, production must be throttled by 12% in the six months to December (this was explained to ShareCafe readers back in mid-July) after the six-month production data was released.
This raises the expectation that activities will have to be significantly curtailed by the end of the year. This explains China’s efforts to curb steel exports to make up for supply shortages. At the same time, it said it will allow steel companies to import a range of finished and semi-finished products duty-free – even pig iron and crude steel (i.e., export the problem of CO2 emissions elsewhere).
Some steel producers in Asia (such as BlueScope in Australia) are already exporting excess coke to China and other markets.
China’s real estate sector is shaky too – the country’s central bank ordered lenders in Shanghai last month to raise interest rates for first-time home buyers and has also urged five cities to stabilize overheated real estate markets.
The fall in prices will change the upward trend in the stock markets around the great global miners – BHP, Rio Tinto, Anglo American and Vale, the Brazilian giants.
However, investors have been more cautious in their excitement for Fortescue, which lagged the ASX this year and July and when compared to its peers.
Friday’s coll -se in iron ore prices will push Australian investors short as they ignored the decline while drooling on massive returns from Rio and from BHP and Fortescue.
And the two will come to Rio with record dividends, but of them will be the high point – from now on the outlook for iron ore – the main profit driver – will be weak – falling demand, falling prices and the same thing again.
Investor excitement soared after the Rio Tinto and Vale interim results for the six months to June (and June 4).
While companies like BHP, Rio, and Vale have copper and nickel – the new “hot” renewable metals (old but remade) – mines and sales – BHP has the largest mine in the world in Chile, Fortescue only has iron ore, and most recently the one Fall of the Week revealed that in a pretty gruesome way.
Fortescue said the average price for the fourth quarter was $ 168 a ton due to record highs over the three months. Friday’s close of trading for 58% fewer fines – Fortescue’s flagship product – fell to $ 146.61 per ton, well below that level, which is just $ 9 per ton above the company’s annual average of $ 135 per ton lay.
Investors seem to understand Fortescue’s commitment well – stocks fell 5.4% on Friday as investors saw the sell-off in the Chinese and Sing -ore futures markets. As a result, they fell 1.3% last week, reducing growth to 5.6% in July and 6.3% so far this year.
Compare the performance of BHP stock – a record price on Friday of $ 54.55 and a record close of $ 53.49. That left an increase of 4.3% for the week, 10% for July and 26% for the year to date.
Rio stocks fell 0.5% on Friday but still rose 5% for the week, 6% in July and 17.2% year-to-date.
BHP and Rio’s copper inventories helped them withstand the fall in iron ore prices from any pressures from the fall in iron ore prices.
The ASX 200 fell 0.02% for the week, rose 1.1% in July, and is up 12.2% year-to-date, meaning BHP and Rio stocks outperformed, but for how long after the iron ore was sold out?
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