• Iron ore fines prices traded this week at $US168.90 per tonne, up $US11.80 on a week ago
  • Hard coking coal prices were 45 US cents lower on-week at $US105.80 per tonne at Queensland ports
  • China’s steel reinforcing bar price is up $US10 this week at $US740 per tonne, a 12-year high

 

Iron ore prices have shrugged off production cuts at Chinese steel mills on air pollution concerns to ascend $US11.80 this week assisted by 12-year-high steel prices in China.

Cargoes of 62 per cent-grade iron ore for delivery to China are trading at $US168.90 per tonne ($221/tonne) this week, according to Metal Bulletin.

“While provinces such as Tangshan have been curbing [steel] output in recent weeks, construction activity in China is entering its peak just before the summer lull,” said analysts at ANZ Bank in a report.

“The emissions restrictions in Tangshan pushed up demand for high-grade fines and iron ore concentrate despite the decrease in overall iron ore prices,” a trader told Metal Bulletin.

However, seasonal rains in Brazil are reported to be affecting shipments of iron ore from the country, leading to fewer cargoes of higher-grade ore reaching the seaborne market.

This is having an impact on iron ore cargo prices as the market tightens, and premiums for higher grades of iron ore which are in greater supply.

“We have recently seen a clear uptrend in the spread between 65% Fe and 62% Fe swaps contracts on the Singapore Exchange,” the trader told Metal Bulletin.

 

Iron ore futures bounce as steel demand surges

Futures prices for iron ore moved higher this week despite the impact of production controls on Chinese steel mills as traders look instead to surging steel demand in the country.

The Dalian Commodities Exchange’s May-settlement iron ore futures contract traded higher Tuesday at ¥1,108 per tonne ($US168.60/tonne), according to exchange data.

“Iron ore futures rebounded as concerns over further curbs on steel output eased,” said ANZ Bank analysts.

“Nevertheless, further capacity reduction remains under consideration in China,” they added.

China imported a record 1.17 billion tonnes of iron ore in 2020, representing a 9 per cent year on year increase, as China’s domestic iron ore production lagged demand.

Raising production from Australia and Brazil is the quickest way for China to increase supply to the seaborne market, but China has instead decided to invest in West African iron ore projects.

“The likelihood of developing these assets in the next five years remains low. A normal construction timeline is in the order of five to seven years,” ANZ Bank said in a report.

 

Steel mill profitability is de-linked from iron ore pricing

Fears that any decline in steel mill profits in China may lead to downward pressure on iron ore prices are misplaced, as the two markets are quite different, some experts said.

“Steel mill profitability is not linked directly to iron ore profitability,” said iron ore market expert and Magnetite Mines (ASX:MGT) director, Mark Eames.

He offered the practical example of a European car maker and a Chinese steel producer, each of which is serving radically different markets with different customers.

“BMW might be making a lot of money out of cars, while a steel maker producing steel for those cars may be losing money,” he said. “They are different markets.”

Therefore, the argument advanced in some quarters that lower steelmaking profits in China can lead to a drop in the price of iron ore does not hold water in the real world.

Also, China has been re-structuring and consolidating its steel industry for some years to drive economies of scale that lead to greater efficiency and increased profitability.

“China has suffered for years from excess steel capacity,” said Eames, adding there are still well over 1,000 steel mills in China.

“The Chinese government’s solution has been to consolidate the industry and have fewer producers of steel that are efficient,” he said.

 

ASX iron ore company share prices

Code Company Price %Wk %Mth %Yr MktCap
EUR European Lithium Ltd 0.065 -6 0 63 $ 62,033,218.85
SRK Strike Resources 0.19 -25 -5 459 $ 49,426,853.60
ADY Admiralty Resources. 0.022 0 47 450 $ 26,660,098.08
TI1 Tombador Iron 0.07 -4 -20 233 $ 68,436,224.42
AKO Akora Resources 0.485 37 20 $ 19,958,300.49
CIA Champion Iron Ltd 5.17 2 -5 203 $ 2,651,173,345.92
MGX Mount Gibson Iron 0.81 2 -8 9 $ 960,592,914.18
MAG Magmatic Resrce Ltd 0.115 5 -23 -45 $ 23,906,947.57
MGT Magnetite Mines 0.05 43 117 5349 $ 134,392,395.35
LCY Legacy Iron Ore 0.015 -6 -32 1400 $ 96,071,077.76
FMS Flinders Mines Ltd 1.25 0 -25 69 $ 210,216,478.37
FMG Fortescue Metals Grp 20.25 6 -16 111 $ 63,365,098,012.44
GRR Grange Resources. 0.49 2 -6 188 $ 596,029,429.47
MIN Mineral Resources. 37.82 1 0 175 $ 7,160,643,157.08
FEX Fenix Resources Ltd 0.235 7 -2 770 $ 109,431,340.80
GEN Genmin 0.25 -2 $ 72,625,220.98

 

New iron ore shipper GWR Group (ASX:GWR) has waved off a second cargo of premium-grade lump ore from its WA mine and has confirmed a third cargo has been booked for April.

The second cargo for 55,100 wet metric tonnes of ore sailed from Geraldton port last week, and is headed to its off-take partner Pacific Minerals.

“I am pleased to report the successful departure of our second shipment of ore from the port of Geraldton and delighted to advise that as a result of the improved capacity in haulage operations we are moving towards more significant production levels,” chairman, Gary Lyons, said.

GWR Group has increased its haulage capacity with additional trucks to ramp up the transport of high-grade ore from its C4 mine in Wiluna to Geraldton.

The company is capitalising on buoyant iron ore prices, and revenue from its early shipments is being used to cover capital and operational expenditure for its mining contractor.

GWR Group is in talks to expand production at its C4 deposit to target extraction of some 20 million tonnes of iron ore.

Chinese rebar prices hit 12-year high

The market for Chinese steel reinforcing bar (rebar) is red hot as prices soared to a 12-year high of $US740 per tonne on super strong demand from the construction sector.

“Higher steel prices support the iron ore market, with futures holding steady despite the recent curbs on steel production weighing on demand for raw materials,” analysts at ANZ Bank said.

Construction demand for rebar steel is increasing up to the market’s traditional mid-year peak season, but stock levels are at relatively low levels.

“Rebar stockpiles posted their second weekly decline last week,” ANZ bank analysts said.

Steel rebar producers appear to encounter little difficulty in passing on higher input and raw material costs to their customers in China.

Production cuts at steel mills in the Tangshan area east of Beijing to tackle air pollution have also had a bullish effect on prices for rebar steel in the Chinese market.

Steel production in Tangshan is understood to have dropped by around 30 per cent in the past month, reported Metal Bulletin.

Some local steel industry sources told Metal Bulletin the cutbacks could continue in some cases through to the end of 2021.

Meanwhile, rebar steel traded on the London Metal Exchange has found good price support for the past few weeks at $US630 per tonne, according to LME data.

 

Queensland hard coking coal market in balance

Spot prices for Australian hard coking coal at ports in Queensland edged lower this week, despite heavy rains in eastern Australia tightening supply to the seaborne market.

May shipments were fetching $US105.80 per tonne in the spot market, down nearly 50 cents on week, as Chinese demand remains weak for Australian coking coal.

Buyers in China may revert to the seaborne market, as there are reports that coking coal shipments from Mongolia have been affected by a resurgence of COVID-19 in the country.

Trucks bringing coking coal to China from Mongolian mines have declined to just 30 a day this week from more than 10 times that number in mid-March, said Metal Bulletin.

China is a major customer for Mongolia’s coking coal at 24.2 million tonnes in the 2020 year.

North American cargoes of coking coal are in short supply on the spot market, as many shipments in the seaborne trade to China are tied up in long-term contracts.

 

ASX coal company share prices

Code Company name Price %Wk %Mth %Yr MktCap
NAE New Age Exploration 0.014 8 8 600 $ 17,073,600.74
CKA Cokal Ltd 0.064 -6 -9 137 $ 61,022,432.66
NCZ New Century Resource 0.165 -3 -3 133 $ 199,638,127.59
BCB Bowen Coal Limited 0.064 7 23 100 $ 62,499,509.29
LNY Laneway Res Ltd 0.006 20 0 71 $ 18,875,329.67
PDZ Prairie Mining Ltd 0.22 5 -15 63 $ 47,954,568.69
AKM Aspire Mining Ltd 0.097 -8 -3 62 $ 49,240,787.55
PAK Pacific American Hld 0.026 24 18 58 $ 7,008,867.80
AHQ Allegiance Coal Ltd 0.09 8 7 27 $ 88,444,022.31
YAL Yancoal Aust Ltd 2.31 1 -10 12 $ 3,050,215,099.47
NHC New Hope Corporation 1.38 4 10 8 $ 1,148,652,773.16
TIG Tigers Realm Coal 0.008 0 14 3 $ 104,533,618.94
SMR Stanmore Coal Ltd 0.76 3 -5 2 $ 202,804,755.75
WHC Whitehaven Coal 1.75 -1 15 0 $ 1,822,617,069.48
MR1 Montem Resources 0.16 10 -6 $ 31,242,469.76
BRL Bathurst Res Ltd. 0.042 0 0 -11 $ 71,799,816.10
CRN Coronado Global Res 0.89 -14 -18 -11 $ 1,321,604,349.50
JAL Jameson Resources 0.12 20 20 -20 $ 36,399,826.80
TER Terracom Ltd 0.087 1 -38 -44 $ 66,317,471.44
ATU Atrum Coal Ltd 0.073 -71 -71 -57 $ 42,459,110.67
MCM Mc Mining Ltd 0.11 -12 -21 -73 $ 16,986,151.05

 

Allegiance Coal (ASX:AHQ) announced this week that coal production at its New Elk mine will start in late April with the first train shipment timed for release in June.

The company has begun talks with steel producers on the sale of spot cargoes of New Elk coking coal with a view to securing longer-term contracts after trial coal samples are tested.

Based on current production schedules, Allegiance Coal plans to deliver 80,000 tonnes of New Elk coal from the US state of Colorado to the New Orleans marine terminal in June.

The coal company noted that global industrial production has recovered strongly from the COVID-19 pandemic, especially in China and is at elevated levels in the Asian country.

“The limitation placed on Australian metallurgical coal exports to China, has in particular supported higher pricing for US coals delivered to this market,” said the company.

Allegiance Coal acquired the New Elk coking coal mine last October and the company is also developing a metallurgical coal project in northwest British Columbia in Canada.

 

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