Market speculators, price gougers, rumour mongers and hoarders, the detectives from the Chinese Government are on the hunt for the culprits who have sent iron ore prices soaring.
Already the salvo appears to have had its desired effect.
As China’s main economic planning body the NDRC and four other regulators met with domestic steel, iron ore, copper and aluminium companies to address matters, already the iron ore price had slid from giddy highs of more than $US230/t to under $US190/t.
Of course, feverish demand from Chinese steelmakers may have had something to do with supporting rampant iron ore prices.
According to the World Steel Association, China’s 97.9Mt of steel produced in April – a whopping 3.26Mt a day – was some 13.4 per cent higher than the same period in 2020.
The 374.6Mt it has fired since the start of the year is even more extraordinary at a 15.8 per cent climb, although early figures from mid-May have shown a drop in output.
It’s a supply-demand thing
Iron ore market expert and Magnetite Mines (ASX: MGT) director Mark Eames said China’s comments on the iron ore price have to be respected within Australia.
But he believes steel demand would need to fall dramatically to send prices sliding in the near term.
He noted iron ore shipments are regularly priced on a still record monthly average rather than the spot price.
“I think some of the daily prices don’t necessarily reflect the underlying strength of the market,” he said.
“There’s not going to be a serious change in the price signal to iron ore suppliers until we see a sustained and dramatic fall in prices and personally I don’t see how that’s in any way likely or realistic for the immediate future.
“China would have to go back 5 or 10 years in terms of its steel production before we would see a material change in the iron ore price.”
For all the shots China has fired over export products like wine and seafood in the quasi trade war it actually sent more money Australia’s way in April.
Preliminary trade figures this week from the ABS showed Australia’s overall export take hit a record at a cool $36 billion, including a $10b surplus.
Iron ore exports declined one per cent in volume but high octane prices drove the value of shipments to China higher by $234m to a record $10.5b.
At Stockhead, we tell it like it is. While Magnetite Mines is a Stockhead advertiser, it did not sponsor this article.