Iron ore price breaks $US200/tonne

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Iron ore prices have hit another record mark, surpassing $US200 ($259) per tonne to outdo last month’s historic high.

The price of 62 per cent iron ore fines imported to the CFR Qindao Port in Northern China reached $US201.88 per tonne on Thursday.

This eclipsed the previous record high of $US195 per tonne (CFR Qindao) on April 27.

The record price arrived following China’s five-day Labor Day holiday.

CRU Group principal analyst, steel, Erik Hedborg said production cuts in Tangshan due to an emissions crackdown had driven up prices.

“Recent production cuts in Tangshan have boosted demand for higher-quality ore and prompted mills to build iron ore inventories as their margins are on the rise,” Hedborg said.

“Iron ore producers are enjoying exceptionally high margins as well, around two thirds of seaborne supply only require prices of $US50 per dry metric tonne to break even.”

China’s National Development and Reform Commission (NDRC) announced an “indefinite suspension” of  trade between China and Australia on Thursday.

According to Wood Mackenzie, China is unlikely to ban imports of the Australian commodities that it heavily relies on such as iron ore.

“The government is more likely to raise the administrative cost for importing commodities from Australia if they want to take action,” Wood Mackenzie stated.

Fitch Solutions expects that iron ore prices will continue to rally before settling in the second half of 2021. It has increased its short-term price forecast for iron ore from $US120 per tonne to $US160 per tonne for the next three-to-six months.

“We believe prices will likely grind lower during the second half of 2021 as supply improves and demand growth slows. We have also raised our 2022 forecast from $US100 per tonne to $US130 as prices will start next year from a higher base,” Fitch Solutions stated.

“Looking beyond 2021, we expect iron ore prices to follow a multi-year downtrend. We forecast prices to decline from an average $US160 per tonne in 2021 to $US75 per tonne by 2025 and $US63 per tonne by 2030.

“This price decline will be driven by a combination of weaker demand growth and stronger supply loosening the market.”

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