The topsy turvy data coming out of China’s steel sector continues to roll on after the world’s biggest steelmaker revealed iron ore imports hit a 13-month high in November despite sliding steel production.

China’s appetite for iron ore roared back in November despite continued curbs on steel production, with trade data yesterday showing imports rose 7% year on year and 15% on the month.

Most of that – about 60% – comes from Australia, although China’s steel industry has been promoting plans heavily in Chinese media over the past week to diversify away from Australian iron ore.

What this means is unclear. It could be a sign of recovering demand, or intense restocking while iron ore prices are relatively low.

It’s not Christmas yet, but it did bring an early spot of festive cheer for miners hoping for positive sentiment in the market.

Iron ore prices were steady at around US$102/t for benchmark 62% fines on Monday.

Dalian futures charged on Tuesday with the most traded May contract up 6.7% to 660 Yuan or US$103.63/t at 6.30pm AEDT.

Prices have been under pressure for several months after climbing beyond US$230/t in May as China has put the clamps on steel production, but have settled between US$90 and US$100/t in recent weeks.

 

Analysts say meaning is still unclear

 

ASX iron ore stocks

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CODE COMPANY PRICE 1 WEEK RETURN % 1 MONTH RETURN % 6 MONTH RETURN % 1 YEAR RETURN % MARKET CAP
MIO Macarthur Minerals 0.435 18 21 -11 -20 $ 62,891,314.73
HIO Hawsons Iron Ltd 0.105 9 36 -18 205 $ 75,080,559.75
FMS Flinders Mines Ltd 0.575 8 -18 -44 -18 $ 97,087,931.78
RHI Red Hill Iron 3.13 8 13 252 1623 $ 211,909,454.68
DRE Drednought Resources 0.047 7 21 104 104 $ 133,347,626.90
PFE Panteraminerals 0.2 5 -22 $ 8,085,000.00
JNO Juno 0.13 4 8 -33 $ 16,278,960.12
HAW Hawthorn Resources 0.098 3 80 92 -2 $ 33,351,561.30
BHP BHP Group Limited 39.61 3 10 -19 -5 $ 201,670,000,000.00
IRD Iron Road Ltd 0.2 3 0 -41 48 $ 158,918,058.80
MGU Magnum Mining & Exp 0.084 2 18 -55 100 $ 41,760,172.78
SHH Shree Minerals Ltd 0.009 0 -18 -36 -25 $ 9,569,132.03
CZR CZR Resources Ltd 0.007 0 -13 -50 -50 $ 24,404,262.94
ACS Accent Resources NL 0.055 0 0 10 206 $ 25,631,500.57
CIA Champion Iron Ltd 4.54 0 12 -31 -7 $ 2,243,759,010.68
RIO Rio Tinto Limited 93.84 -2 6 -25 -17 $ 144,430,000,000.00
MDX Mindax Limited 0.049 -2 -4 -38 1533 $ 93,341,852.98
MGT Magnetite Mines 0.0225 -2 2 -67 88 $ 69,316,431.38
FEX Fenix Resources Ltd 0.22 -2 2 -31 2 $ 110,487,062.40
MIN Mineral Resources. 43.97 -2 16 -8 27 $ 8,307,520,781.89
TI1 Tombador Iron 0.03 -3 -9 -69 -42 $ 33,538,510.14
MGX Mount Gibson Iron 0.3725 -3 -3 -56 -54 $ 435,804,491.88
FMG Fortescue Metals Grp 17.02 -3 19 -26 -17 $ 52,804,248,343.70
EQN Equinoxresources 0.1925 -4 -4 $ 8,100,000.18
LCY Legacy Iron Ore 0.023 -4 64 53 229 $ 140,904,247.37
GWR GWR Group Ltd 0.1 -5 -5 -61 -56 $ 31,035,610.41
MAG Magmatic Resrce Ltd 0.093 -6 -7 -58 -47 $ 23,921,759.01
GEN Genmin 0.155 -6 11 -39 $ 43,754,616.75
ADY Admiralty Resources. 0.014 -7 8 -22 0 $ 18,250,108.14
GRR Grange Resources. 0.59 -7 10 13 115 $ 665,469,751.35
VMS Venture Minerals 0.043 -9 -4 -67 10 $ 60,950,372.30
BCK Brockman Mining Ltd 0.043 -9 -2 5 23 $ 426,844,678.03
HAV Havilah Resources 0.16 -9 -14 -36 -11 $ 50,535,742.62
TLM Talisman Mining 0.155 -9 11 -28 41 $ 29,099,622.04
SRK Strike Resources 0.09 -10 -28 -60 -31 $ 24,300,000.00
FEL Fe Limited 0.027 -10 -18 -43 -10 $ 24,111,146.22
AKO Akora Resources 0.205 -13 0 -29 $ 10,730,408.48
PLG Pearlgullironlimited 0.076 -14 -28 $ 4,095,330.60
SRN Surefire Rescs NL 0.011 -15 0 -50 -77 $ 12,147,414.50
EFE Eastern Iron 0.057 -20 10 375 455 $ 51,993,531.30
RLC Reedy Lagoon Corp. 0.03 -25 -33 67 114 $ 16,200,784.98

 

Analysts watching the rise in China’s commodity imports in November are cautious on whether the rebound in demand will be longer lasting.

“The rise in China’s iron ore imports bucks a downtrend that began in August. China’s demand for iron ore has weakened in H2 2021 because of policymakers’ goal of cutting emissions and weakening property construction,” Commbank senior Asia economist Kevin Xie said.

“The lift in China’s iron ore imports is consistent with reports of easing steel output restrictions in Tangshan (~14% of China’s steel output) last month.

“A lift in steel mill margins in China also indicated some improvement in steel demand. Steelmakers might increase inventory following a sharp fall in iron ore prices.

“However, stricter blast furnace and sintering restrictions were heard to be implemented again in Tangshan last week, indicating the unpredictability of north China’s air quality related restrictions.”

Xie warned the Winter Olympics coming up in Beijing in February means mill restrictions will be in place for months to come.

What happens after that is uncertain, with many observers cautiously optimistic steel output curbs will be walked back after that.

Renewed diplomatic tensions between the US and Australia on one side and China, including the threat the Western nations will issue a diplomatic boycott of the Olympics, would raise more uncertainty about China’s response.

The communist powerhouse has placed restrictions of billions of dollars of Aussie exports over the past two years, although crucially not our iron ore.

While China’s imports have risen, port inventories have as well. Consultants MySteel reported 154.57Mt of iron ore imports sitting at Chinese ports as of Friday, up 2.05Mt on the week and far above the 124.5Mt portside at this time last year.

Although imports were up, exports from the majors were still timid, up 3% year on year but unchanged from October at 89Mt in November. Maintenance impacted BHP and FMG in particular.

Analysis of high frequency shipping data from DBX Commodities suggests Rio Tinto and Vale will both miss guidance in 2021, with Rio expected to deliver 315Mt against its adjusted guidance of 320-325Mt despite increasing its shipments by 3Mt in November to 28Mt.

DBX predicts Vale will deliver just 295Mt, well shy of its guidance of 315-340Mt (adjusted last month to 315-320Mt).

While all the big miners have plans to expand significantly in the coming years, they continue to struggle with ramp-ups they’ve already promised.

DBX predicts the “Big 4” will send 1.07Bt of iron ore off to sea in 2021, 21Mt short of the lowest point of their collective guidance.

 

Big boys share prices today:


 

 

High grade premiums creep back

Contracting margins for steelmakers have pared back some of the record premiums seen earlier in the year, but market signals suggest higher grade ores are coming back into fashion.

Having fallen Icarus-like from record highs of US$62/dmt over the 65% index in the September Quarter to US$47/dmt in the December Quarter, Vale is back commanding a healthy US$55/dmt premium for its blast furnace pellets in the January Quarter.

S&P Global says the Brazilian major is also commanding a premium of US$58/t for its direct reduced iron pellet product, up from US$50/t in December but down from the remarkable US$70/t Vale charged in the three months to September 30.

That customers are willing to pay more gives credence to suggestions downstream demand has improved slightly, despite bearish signals from China’s property market, and steel mill margins are less stretched.

DR pellets will be an important product going forward for Vale, which like the big Australian miners will spend US$4-6 billion on announced decarbonisation initiatives to head towards a net zero by 2050 target.

It has been trialling a process to make that product with 10% less greenhouse gas emissions by replacing fossil fuels with biochar in the pelletising process.

That is important because Vale says pelletising accounts for 33% of its emissions. It wants to cut direct and indirect emissions by a third by 2030.

A 57,000t batch was recently made with 25% vegetable based biochar in its fuel mix, with the next trial to test a fuel mix containing 50% of the organic material.

“Our objective is, in 2022, to test the technical feasibility of further increasing the share of the use of biochar in the furnace,” Vale engineer Rodrigo Boyer said.

 

Why are pellets an important product?

Pellets will be a key part of the future of iron ore production along with magnetite concentrates, because the extremely high grade products can be used in the DRI process.

Largely run currently by using gas to power the reduction process that take iron ore feedstock into steel, there are hopes DRI plants will be retrofitted to be run off green hydrogen, making steel with effectively no emissions.

There are warnings that businesses and countries that can’t produce these products, and produce them without emissions on their end, will fall behind in the global steel economy.

That is precisely the warning BloombergNEF researchers had for Australia last week if the country does not shift its focus from low grade Pilbara iron ores to high grade ore sources.

While iron ore drove the largest mining dividend splurge and profit take in history last year, the winds of change wrought by the energy transition could well blow away from Australia.

“Brazil is expected to have one of the lowest costs for hydrogen production by 2030, according to research by BloombergNEF,” BNEF said.

“South Africa and India have good iron ore reserves and the potential to produce a large amount of low-cost clean power.

“The world’s largest iron ore producer, Australia, however, currently produces lower grade ores, and could lose its number one place in the supply chain, if it does not invest in equipment to upgrade its product.”

 

South32 gets State backing on Dendrobium

 

ASX coal stocks

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CODE COMPANY PRICE 1 MONTH RETURN % 6 MONTH RETURN % 1 WEEK RETURN % 1 YEAR RETURN % MARKET CAP
LNY Laneway Res Ltd 0.006 20 20 9 -14 $ 23,424,395.60
BRL Bathurst Res Ltd. 0.655 -13 108 4 64 $ 109,409,038.72
WHC Whitehaven Coal 2.485 2 41 3 55 $ 2,581,610,580.00
NHC New Hope Corporation 2.05 7 21 3 43 $ 1,706,332,018.10
PDZ Prairie Mining Ltd 0.22 -2 -8 2 30 $ 53,066,579.40
CRN Coronado Global Res 1.13 -12 45 1 6 $ 1,827,334,565.70
JAL Jameson Resources 0.08 -7 -11 0 -27 $ 24,266,551.20
CKA Cokal Ltd 0.15 -6 146 0 100 $ 138,219,641.17
NAE New Age Exploration 0.011 0 -35 0 -15 $ 14,358,989.10
YAL Yancoal Aust Ltd 2.53 -9 22 -2 10 $ 3,340,711,775.61
TER Terracom Ltd 0.175 -10 40 -3 13 $ 124,345,258.95
ATU Atrum Coal Ltd 0.03 -27 -20 -3 -90 $ 19,944,411.74
BCB Bowen Coal Limited 0.135 -21 119 -4 188 $ 172,925,544.87
AKM Aspire Mining Ltd 0.076 -6 -8 -4 9 $ 38,580,410.86
SMR Stanmore Resources 0.985 -5 35 -5 24 $ 262,294,150.77
PAK Pacific American Hld 0.017 0 -13 -6 -17 $ 8,123,915.83
AHQ Allegiance Coal Ltd 0.51 1 -15 -7 79 $ 169,613,968.80
NCZDA New Century Resource 1.905 -12 -41 -9 -41 $ 161,323,740.00
MCM Mc Mining Ltd 0.082 -15 -22 -10 -57 $ 12,662,403.51
TIG Tigers Realm Coal 0.018 -18 112 -22 49 $ 235,200,642.62

 

South32’s (ASX:S32) Dendrobium coal mine in the Illawarra region of NSW looks like it will be extended after all just months after a $950 million proposal to keep the mine running to 2048 was knocked back by the State’s Independent Planning Commission.

The project was announced over the weekend as “State Significant Infrastructure” by deputy premier Paul Toole and planning minister Rob Stokes due to “its importance to Port Kembla steelworks and its thousands of employees”.

It had been rebuffed by the IPC due to the mine’s potential risk to nearby water infrastructure supplying the Sydney and Illawarra regions.

“Dendrobium is a critical source of coking coal for the Port Kembla steelworks and the decision to declare the project SSI will provide thousands of workers with greater certainty on the future of their jobs,” Deputy Premier and resources minister Paul Toole said.

“This decision recognises the proposal’s potential economic benefits, with the mine already contributing $1.9 billion to the State’s economy each year, employing 4,500 workers and supporting another 10,000 jobs across the Illawarra.”

South32 is now able to prepare an environmental impact statement on the project for public comment.

The move has been strongly criticised by climate and corporate activist groups, with some pointing out that the decision “reeks of state capture”.

“South32 and the NSW Minerals Council lobbied the NSW Government for months to overturn the rejection of the Dendrobium expansion,” Australasian Centre for Corporate Responsibility’s director of climate and environment Dan Gocher said.

“Despite committing to shareholders in October that its industry associations would advocate in line with the Paris Agreement, South32 engaged climate change deniers in Pauline Hanson’s One Nation and the Nationals to push the NSW government to bypass the IPC.”

 

South32 share price today: