The 2021 boom in iron ore has been popped with the price of the most popular type – 62% Fe fines – dropping into negative territory for the first time this year on Monday.
Driving the fall has been the fallout from the crackdown on polluters among steel makers in Tangshan, one of China’s major steelmaking centres that has seen the price of the most popular ore type lose more than 10% of its value so far this month.
The crackdown intensified over the weekend with the penalties against 23 steelmaking companies in Tangshan revealed – production(capacity) cuts for some or all of 2012.
Tangshan accounts for around 144 million tonnes of crude steel output a year – about 14% of China’s annual output in 2020.
The capacity cuts mean a lower appetite for iron ore – especially imported ore from Australia and to a lesser extent, Brazil.
And that saw the sell-off in iron ore prices continue Monday as the price of the most traded iron ore type globally – 62% fe fines delivered to northern China again fell.
The Fastmarkets index price fell to $US157.01 on Monday, down $US4.38 on the day, or 2.7% and under the December 31 level of $US160.47.
And the price of 62% fe fines is now down 10.6% so far in March – they ended February at $US160.47 a tonne.
The price of the higher quality 65% Fe fines (mostly from Brazil) ended at $US184 a tonne on Monday, down $US3.50 a tonne from last Friday.
That means the 65% Fe price has fallen 7.5% from the end of February level ($US199.40 a tonne) but remains above the December 31, 2020 level of $US172.90 a tonne.
The weekend’s news hit the prices of the big three Australian iron ore miners and exporters on Monday with the price of Fortescue Metals falling more than 3%, Rio shares losing 1.1% and BHP shares easing by nearly 0.9%.
They will all come under further pressure Tuesday.
Analysts say if the Tangshan measures cut steel production in the region by 22 million over the year (as suggested in reports at the weekend), iron ore imports could fall by more than 30 million tonnes – the bulk of which would hit Australian exporters as we supply 70% or more of China’s annual imports.
That’s around 3% of 2020 Chinese iron ore imports.
A total of 23 steel mills (crude and stainless and other speciality types) have been caught not following previous production cuts aimed at lowering winter smog levels.
