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According to Bloomberg, the cost of iron ore has exceeded $ 100 per ton, since supply problems in Brazil coincide with the steady demand for steel and raw materials in China.
Spot ore prices with Fe 62% on Friday May 29 rose to $ 101.05 per ton, as Brazil, the second largest exporter in the world, saw a surge in cases of coronavirus infection, raising concerns that a pandemic could curb local supplies. In April, mining company Vale SA reduced annual shipping guidelines due to bad weather and the impact of the virus on work. Meanwhile, port iron ore reserves in China continue to decline. In addition to Vale, higher prices will support profitability in the BHP Group, Rio Tinto Group and Fortescue Metals Group Ltd.
Analysts at China International Capital Corp. note that the early resumption of industrial activity in China contributed to the restoration of processing activities, and steel mills continue to increase production volumes. “This year, iron ore will mainly maintain a tight balance,” and, according to them, the proposal is gradually being restored from the third quarter.
Spot prices are now the highest since August. Futures in Singapore were at $ 97 per ton, reaching the largest monthly gain. On the Dalian Mercantile Exchange, futures in May rose 23%.
Credit Suisse Group AG recently calculated that the market is now at “peak tensions,” and this condition is likely to persist until July. Bloomberg Intelligence expects a surplus of 34 million tons in the second half of the year due to increased supply and stagnation in demand, which will reduce the deficit of 25 million tons in the first half. This sheds light on whether price increases are sustainable.
“There are doubts” about the strength of growth over the next one to three months, said Hui Heng Tan, an analyst at Marex Spectron Group. Growth in shipments in Australia and Brazil is expected to gain momentum, although disruptions in the South American country will be a factor worth seeing in the second half of the year. This increase in volume could potentially coincide with when China emerges from its peak construction period with increased steel reserves.
