Iron ore drops below $US100 in wake of COP26

iron ore

The price of 62 per cent Australian iron ore fines has dropped below $US100 ($134.6) per tonne for the second time in as many months, as China capped steelmaking capacities.

The price at China’s Qingdao Port fell to $US96.8 per dry metric tonne on November 2, a drop of $US5.70.

This last occurred around the third week of September, causing several Australian iron ore producers to temporarily shut up shop as operations became financially unviable.

Through most of May, June and July, the price of iron ore fell below $US200 per tonne on just one occasion, with annual highs above $US225 per tonne seen in early May.

However, while the effects of free-falling prices have affected small to medium players, BHP wasn’t phased in its economic and commodity outlook from mid-August.

“The increasing likelihood of stern cuts to steel output in China in the current half year, as affirmed by China’s peak industry body in early August, is testing the bullish resolve of the futures markets,” BHP stated.

“Prices have decreased materially in late July and early August, but they remain extremely high relative to history at around $US160 per tonne at the time of writing.”

S&P Global Platts – an independent leader in benchmark prices and analysis – said the price fall was due to China’s continued cuts in steelmaking to meet its emission reduction targets.

This was in relation to China ordering one its largest steelmaking hubs, Tangshan, to curb steel production for environmental reasons.

In the shadow of the United Nations’ climate change Conference of the Parties (COP26) in Glasgow, Scotland, a keener eye than usual has been cast across the emissions reduction plans of heavy carbon emitters like China.

In his address to the COP26, Australia’s Minister for Industry, Energy and Emissions Reductions Angus Taylor recognised the part Australia plays in producing products key to modern life.

“Australia is the world’s fourth largest energy exporter – we’ve specialised in the production of energy and emissions-intensive commodities across sectors like mining and agriculture,” Taylor said.

“And those exports are a big deal in our Indo-Pacific region too, with Australia being one of the largest and most reliable suppliers of energy, resources and agricultural products.”

He went on to outline the ways in which Australia would reduce its emissions using a range of new and future technologies which will advance through continued development in these sectors.

“We estimate the six priority areas for investment in the Roadmap – clean hydrogen, energy storage, low carbon materials including green steel and aluminium, carbon capture technology, soil carbon measurement, and now ultra low cost solar – will deliver around half of the reductions we still need to realise to achieve net zero by 2050,” Taylor said.

A number of green steel initiatives have been announced in 2021 by major miners Rio Tinto, BHP and Fortescue Metals Group.

Their studies intend to wipe coking coal from the equation, thereby reducing the amount of carbon emissions produced per tonne of steel.

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