Iron ore and coal prices kick up on Australian cyclone, mine death
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Iron ore buyers concerned about supplies in the wake of a cyclone and a coal mine death have pushed up prices in the past week.
While earlier this week some analysts had tipped a 2020 decline in the iron ore price to $US89 ($129) a tonne, the price has risen in the past week by 2 per cent to $US96.15 a tonne.
RBC Capital Markets flagged the change and tied the movement back to concerns about tropical cyclone Claudia which is passing through WA’s iron ore ports in the northwest of the state.
Cyclone season starts in November in WA and runs through until April.
About 98 per cent of the 28 billion tonnes of iron ore Australia makes comes from WA, so supplies in WA can affect world pricing.
Australia had the world’s largest estimated reserves of iron ore in 2016 — 30 per cent or 52 billion tonnes of the world’s 170-billion-tonne supply.
In an equity research note, RBC flagged a number of other global factors, including supply constraints out of Brazil which is experiencing heavy rains.
On the demand side, the bank noted people were stocking up less now ahead of January’s lunar new year holiday in China.
RBC said China had stopped “manipulating” currency on Monday, leading to an appreciation of the Yuan compared to the US dollar and improved demand for seaborne material.
Earlier this week, reports tipped iron ore prices would decline 23 per cent to $US89/tonne this year.
IBISWorld analyst Michael Youren said he expected iron ore shortages stemming from a Brazilian tailings dam collapse would be worked through during the year but Australian export earnings and volumes would improve alongside increases to production capacity.
Macarthur Minerals (ASX:MIO) executive chairman Cameron McCall also expects strong iron ore prices throughout the year.
Meanwhile, metallurgical coal (used to make steel) has risen 5.2 per cent to $US152.50/t in the past week, taking its year-to-date increase to 13.4 per cent.
“Seaborne met coal continued to move up this week on strong demand out of China as buyers continued to restock ahead of the lunar new year,” RBC wrote.
Chinese New Year or lunar new year is one of several holidays in Asia and takes place on January 25 this year, before annual Australia Day celebrations.
Demand in India is also firming up as steel production recovers, according to CRU.
In Australia, the 12-million-tonne-a-year Curragh mine in Queensland was shut down after the loss of a Theiss worker who was changing a tyre.
Areas of the Coronado Global Resources (ASX:CRN) mine will begin reopening from Friday, with tyre and wheel rim fitting to take place off-site until an inspector gives the go-ahead for mechanics to restart the activities.
“Our priority remains the welfare and safety of our employees and contractors and supporting the family and all those impacted at this sad time,” Coronado chief executive officer Gerry Spindler said.
“Our hearts go out to those mourning the loss of a loved one, friend and valued colleague.”
Internal and external investigations are underway.
RBC believes Canadian major Teck Resources is pricing met coal at $US122/t and holding other commodities at spot pricing, while Alabama-based Warrior Met Coal is pricing met coal at $US141/t.
CRU, meanwhile, says smoke and bushfires in New South Wales have put about 6 to 8 million tonnes of annual met coal production at risk.
Thermal coal prices also climbed over the past week.
Newcastle coal added 1.1 per cent and Richards Bay coal was up 1.3 per cent, while the CIF ARA price was down 1.6 per cent.
Chinese steel prices were up, with export hot rolled coil (HRC) – a steel used in trucks and vehicle seat frames – advancing 2.2 per cent.
Steel can be used in the construction industry and for making cars, ships, trucks, pipelines, trains and railway tracks.
The price of rebar, a reinforcing steel, gained 2.2 per cent, while domestic HRC demand was flat.
Steel prices in North America were also on the rise.