Iron ore falls hard on Chinese regulation

iron ore

Bulk carrier unloading iron ore in the chinese port Zhangjiagang. Image: Shutterstock/ambient_pix

The iron ore price has dived $US10.5 per tonne (/t), as China’s trade regulators moved to cool the recent rally to five-month highs above $150 ($AUD209).

After steadily increasing since November lows of $84/t, a usually volatile iron ore price has recovered higher than forecast to this point.

But Singaporean analyst of Navigate Commodities Atilla Widnell said this steady nature wouldn’t last long.

“We are entering what might be an incredibly volatile period for iron ore, given that the bull narrative is pushing the market higher while it is intermittently pegged back by Chinese government rhetoric,” Widnell said.

This sentiment was exemplified in February as Chinese regulators dispatched investigation teams to key ports to ensure price data released by information providers was not fabricated.

As a result of growing tensions, the price of seaborne iron ore fell to $136.65 in the Chinese port of Qingdao.

The drop of more than $10 slashed all of February’s gains in a single day.

At the end of September 2021, as iron ore prices sat around $110/t after falling from mid-year highs above $200/t, S&P Global presented views from around the industry to give its outlook into 2022.

“The demand and price outlook is a lot weaker,” S&P Global Market Intelligence analyst Ronnie Cecil said. “It’s a tricky one.”

Very Independent Research analyst Jon Tumazos told S&P it was best for China to have a long-term view of iron ore’s prospects.

“I think it suits their purposes to keep output low in 2022 and let it rebound in 2023, 2024,” Tumazos said.

Smaller iron ore miners will be hoping analysts are correct in their long-term ideals, as GWR Group and CuFe were forced to halt mining operations in late-2021, due to unfeasible prices.

Earlier in 2022, these miners were able to resume operations with GWR Group hedging its bets and securing shipments into July to remove risk of volatile prices.

GWR Group chairman Gary Lyons told Australian Mining he was relieved to have made it through a rough patch in a relatively strong position.

“It is great to see the flagship C4 iron ore mine back in full production, having worked through the recent volatility in iron ore prices, the GWR team has been able to refine its operations focussed on cost reduction and fixed price contract shipments,” he said.

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