Iron ore prices resumed their slide on Monday with an 8% slump on more talk of Chinese production cuts and moves to diversify ore suppliers to domestic producers.
News of a military coup where China is trying to finance a rival iron ore industry to Australia, had no impact on prices.
The price of 62% Fe fines from the Pilbara fell 8.3% (as much as they fell last week) to $US132.38 a tonne. That’s nearly $US100 a tonne lower than the all time high of $US237 a tonne hit in mid-May.
That $US132 a tonne price is now below Fortescue’s average price for 2020-21 of $135 a tonne and $US168 a tonne for the June quarter – all of which points to a weaker result his half is those losses are sustained.
The price of 58% Fe fines (still a product from Fortescue Metals) fell close to $US100 a tonne at $US104.90. The fall of $US9.84 was 9%. And the price of 655 Fe fines from Brazil fell to $US150.90 a tonne, a drop of more than 7%.
Prices reacted to comments from China’s bombastic steel industry group that the country (IE its members) are aiming to increase domestic iron ore concentrate output by 100 million tonnes during the 14th five-year plan ending 2025.
Those comments were made on Saturday by China Iron and Steel Association vice chairman Luo Tiejun who also said China aims to intensify exploration of overseas iron ore resources and drive the development of high-quality iron ore projects such as Guinea’s Simandou project in Africa.
That’s the country where a coup and street violence has raised the prospect of instability.
The latest weakness though has more to do with the government decarbonisation campaign (ahead of the Glasgow climate change meeting in November). Last week saw a big sell off mid-week for the same reason.
Analysts wonder if Chinese steel prices are about to explode thanks to the combination of falling production and supplies of products such as rebar and continuing solid demand from the country’s seasonal lift in construction activity which usually peaks in September and October, before cold weather in winter stalls projects.
Covid Delta outbreaks, weak activity across much of the economy and a floundering government approach to continuing stimulus might see construction activity reduced.
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Meanwhile oil prices fell in holiday impacted trading in northern hemisphere markets after Saudi Arabia cut its offering price to Asian customers by at least $US1 a barrel for October uploadings.
Brent crude futures fell 39 cents to settle at $US72.22 a barrel in Europe while US West Texas Intermediate crude was down 40 cents at $US68.89 a barrel in scattered electronic dealings on the Labor Day holiday in New York.
Reuters reported that Saudi Aramco notified customers in a statement on Sunday that it will cut October official selling prices (OSPs) for all crude grades sold to Asia, its biggest buying region, by at least $US1 a barrel.
The cuts came six days after OPEC and its allies, a grouping known as OPEC+, raised daily output by 400,000 barrels each month between August and December.
“Given that OPEC+ is continuing its plan to raise production monthly, despite weak data from China and the U.S. raising slowdown fears and Saudi Arabia looking for market share in the region, oil is likely to remain under pressure,” said Jeffrey Halley, senior market analyst for Asia Pacific at brokerage OANDA.
The falls in crude futures added to easiness on Friday after a weaker-than-expected US jobs report indicated a patchy economic recovery that could mean slower fuel demand during a resurgent pandemic.
But the losses were tempered by the continuing shut in for oil and gas in the Gulf of Mexico in the wake of Hurricane Ida. The restarting of refineries and pipelines in Louisiana is also taking longer than expected.
Around 1.5 million barrels a day of oil production in the Gulf of Mexico remains shut in after Hurricane Ida, the US Bureau of Safety and Environmental Enforcement said on Monday. Another 1.8 billion cubic feet a day of natural gas output was also shut-in.
