• Iron ore fines prices traded this week at $US165.30 per tonne, up $US1.50 on a week ago
  • Hard coking coal prices were up $US4 on-week at $US94 per tonne at Queensland ports
  • China’s reinforcing bar price is at $US692 per tonne, up $US12 per tonne on a week ago

 

Market prices for standard grade 62 per cent iron ore have eased back this week from December highs to levels around $US165 per tonne ($215/tonne).

Steel makers had chased the spot price to $US176.50 per tonne ($233.40/tonne) in the lead up to Christmas, according to Metal Bulletin.

The iron ore price suffered a small dip over the Christmas holidays, retracing to around $US163.80 per tonne, as trade slowed for the festive period.

Reports circulated that China’s Ministry of Industry had called on the country’s steel industry to make some production cuts in the 2021 year.

“The government will probably increase steel production restrictions to reduce the crude steel output next year [2021], which may affect the iron ore blending ratios in blast furnaces,” a Beijing iron ore trader told Argus Media.

The talk of steel production cuts in China may have rattled the iron ore market, although market experts suggested any cuts would be difficult to achieve.

 

Price resilience on supply issues and rising consumption

Iron ore experts said they expect prices for Australian cargoes to stay resilient on supply issues in Brazil and strong Chinese consumption.

They point to China’s increased steel production which is on course to surpass 1 billion tonnes for the first time in 2020 as adding to iron ore demand.

“In our view, Chinese steel output will continue to grow at a moderate pace through 2022-2023, and coupled with a recovery in ex-China demand, will require high cost supply,” said analysts at UBS bank in a recent report.

There is also Brazilian miner Vale’s less-than-expected iron ore production which the company has forecast at 315 million to 335 million tonnes in 2021.

This is from its production capacity of 350 million tonnes for the 2021 year, and up only marginally from its 2020 production of around 305 million tonnes.

Some relief to the supply-constrained iron ore market has been provided by an announced restart of operations at Samarco’s Germano and Ubu complexes.

The restart was flagged by BHP (ASX:BHP) in a Christmas Eve notice, as the Australian miner is a 50 per cent shareholder in Samarco.

Vale has the other 50 per cent stake and Samarco’s production had been halted since November 2015 after a dam failed at its Germano iron ore operation.

“Independent tests have been carried out on Samarco’s preparations for a safe restart of operations,” said BHP.

“Samarco expects initially to produce approximately 8 million tonnes of iron ore pellets per annum,” said the company.

Samarco’s gradual restart of its Germano and Ubu complexes includes a new dry stacking system for tailings disposal.

The Australian government expects iron ore prices to remain strong for the next six months on a combination of factors.

“Prices have been held up by a combination of production constraints in Brazil, ongoing stimulus-driven demand in China, and the relatively low price of metallurgical coal, which gives steelmakers added flexibility to pay more for iron ore,” said the Australian government’s chief economist in his commodity sector report for the December quarter.

Australia’s iron ore export trade is led by BHP (ASX:BHP), Rio Tinto (ASX:RIO), Fortescue Metals Group (ASX:FMG) and Hancock Prospecting.

Commonwealth Bank of Australia said in a report that iron ore prices could slip below $US100 per tonne next year.

“We still think that iron ore prices still have a good chance of averaging $US90 per tonne by Q4 2021, despite near term prices likely to stay high in the short term,” said CBA analysts in a December report.

 

ASX iron ore company share prices


Code Company Price %Wk %Mth %Yr MktCap
LCY Legacy Iron Ore 0.048 200 586 2300 $312.4M
FMG Fortescue Metals Grp 23.55 6 39 115 $74.0M
MGX Mount Gibson Iron 0.935 5 27 1 $1.1B
MIN Mineral Resources. 35.06 1 17 109 $6.6B
AKO Akora Resources 0.34 0 0 0 $18.6M
FEX Fenix Resources Ltd 0.24 -1 70 428 $105.6M
EUR European Lithium Ltd 0.047 -4 12 -37 $34.1M
CIA Champion Iron Ltd 4.84 -5 11 66 $2.5B
MAG Magmatic Resrce Ltd 0.175 -5 -19 -19 $31.2M
SRK Strike Resources 0.145 -6 21 209 $35.8M
ADY Admiralty Resources. 0.012 -8 -25 50 $13.9M
TI1 Tombador Iron 0.056 -11 22 166 $39.9M
MGT Magnetite Mines 0.012 -14 9 221 $34.3M

 

Congo iron ore project licences withdrawn

Supply issues for iron ore have been highlighted by a dispute in Africa’s Republic of Congo involving Australian iron ore company Sundance Resources.

The government of the Republic of Congo has issued a decree to remove a mining permit from Sundance Resources’ Congo Iron subsidiary.

Published in the Official Journal of the Republic of Congo in December, the decree confirms the removal of a mining permit from Congo Iron for its Nabeba project.

“A second decree, also in the Official Journal, has announced the issuance of a mining permit for Nabeba to Sangha Mining Development Sasu,” said Sundance Resources in a December 21 statement.

“Sundance does not know who or what Sangha Mining is, or who Sangha Mining’s beneficial owners are. Sundance is also not aware of any previous mining activity in Congo by this group,” said the company.

Other decrees in the Official Journal announced permits and licences for other iron ore projects in the African country have changed hands.

They include the removal of a mining permit for the Avima iron ore project and the issuing of permits for Avima and the Badondo exploration licence to Sangha Mining.

Sangha Mining, based in the Congo city of Pointe-Noire, appears to have some Chinese financial backing, according to Bloomberg.

Sundance Resources said it had initiated arbitration proceedings with the Republic of Congo and was seeking damages of $US8.76bn from the government.

“In the notice of expropriation that the company issued to Congo Iron, Sundance has claimed damages to the value of $US8.76 billion based on the iron ore price of $US154 a tonne on the day the notice was lodged,” said the company in a statement.

The Australian iron ore company said it had invested $400m in its Mbalam and Nabeba iron ore projects situated on the border of Congo and Cameroon.

Sundance Resources (ASX:SDL) de-listed from the ASX in December.

 

Chinese steel rebar prices close to $US700 per tonne

Steel reinforcing bar prices at the Shanghai trading hub in China have risen to $US692 per tonne this week, up $US12 per tonne on a week ago.

China’s largest producer of rebar, a type of steel product used for reinforcing concrete, has increased its listed prices by $US23 per tonne this week.

Shagang Group based in eastern China said it would raise prices for its steel products for delivery in the first half of January, reported My Steel.

“Steel stocks are low, and this is the situation across the whole industry,” a company official told My Steel.

China’s construction and steel industries are expected to slow activity in the weeks leading up to the country’s Lunar New Year holiday in mid-February.

“We expect that rebar prices will drift lower in December amid a seasonal slowdown in construction activity, before they rebound again in January-March 2021,” said Metal Bulletin in a recent report on China’s steel sector.

Spot-traded prices for steel reinforcing bar traded on the London Metal Exchange have also risen sharply and are trading at $US656 per tonne, currently.

There is effectively an arbitrage or price difference of $US36 per tonne in prices of rebar on the London-traded market compared with China.

The LME steel rebar contract for month-ahead delivery has already surpassed its last peak of $US600 per tonne back in February 2018.

 

Bulk Buys
Steel reinforcing bar prices have accelerated on the London Metal Exchange. Image: LME

 

Chinese buyers pay premium prices for North American coal

Shipments of hard coking coal for arrival at Chinese ports in February 2021 are trading at nearly $US200 per tonne this week, according to Metal Bulletin.

North American cargoes continue to set traded prices for hard coking coal landed in China, despite Australian cargoes offering a cheaper option for buyers.

At Queensland’s coal terminals, spot trades were heard for standard quality hard coking coal at prices around $94 per tonne.

This is almost half of the price of North American coking coal shipped to China, and higher prices for this cargo are likely to eat into profit margins for steel producers.

Australian hard coking coal remains off limits to Chinese buyers as a result of an informal instruction from Beijing, according to reports.

This leaves Australian cargoes open to buyers from India and other Asian countries who are taking up some of the slack left by Chinese purchasers.

China’s annual quota for imports of all types of coking and thermal coal in 2020 expired on December 31, and its system of quotas usually resets on January 1 each year.

At this early stage in 2021, reports suggest China has issued a new round of import quotas for coal, but details around volumes are still sketchy.

Futures prices for Australian coking coal on the Chicago Mercantile Exchange are trading at levels higher than physical cargo spot prices.

For February settlement, the futures price is $US122 per tonne, and increases to $US136 per tonne for March, and to $US142 per tonne for April.

North Queensland suffered heavy rainfall and flooding in some areas after cyclone Imogen crossed the Gulf of Carpentaria near Karumba at the weekend.

The first cyclone of Australia’s November 2020 to April 2021 season, Imogen was downgraded to a category one storm and did not affect the Bowen coal region.

 

ASX coal company share prices


Code Company name Price %Wk %Mth %Yr MktCap
AKM Aspire Mining Ltd 0.089 24 22 -44 $41.1M
SMR Stanmore Coal Ltd 0.795 14 14 -22 $215.0M
PAK Pacific American Hld 0.023 10 -8 -7 $7.2M
NCZ New Century Resource 0.24 4 12 2 $302.5M
LNY Laneway Res Ltd 0.007 0 0 17 $22.7M
BRL Bathurst Res Ltd. 0.039 0 -9 -61 $66.7M
BCB Bowen Coal Limited 0.048 0 -6 -6 $45.1M
AHQ Allegiance Coal Ltd 0.05 0 -9 -70 $41.6M
WHC Whitehaven Coal 1.61 0 25 -38 $1.7B
TER Terracom Ltd 0.17 -3 17 -54 $131.9M
YAL Yancoal Aust Ltd 2.38 -4 20 -18 $3.3B
MCM Mc Mining Ltd 0.19 -5 0 -62 $29.3M
PDZ Prairie Mining Ltd 0.18 -5 -10 -22 $41.1M
CKA Cokal Ltd 0.07 -5 3 52 $62.6M
NAE New Age Exploration 0.011 -8 -8 175 $11.9M
JAL Jameson Resources 0.11 -8 -8 -41 $33.4M
CRN Coronado Global Res 1.04 -9 15 -50 $1.4B