STEEL NEWS

MEPS on the reasons for the rise in iron ore prices

According to British analytical agency MEPS International Ltd., prices for iron ore are growing. By mid-December, prices reached approximately $ 160 per ton. The last time this level was recorded at the beginning of 2013. Rising demand, especially in China, is driving up the cost of raw materials.

A dispute between the authorities of China and Australia restricts trade in various goods between the two countries. However, this has not yet affected the supply of iron ore due to the need for high quality material in China.

Supply restrictions in Brazil have tightened the market. Moreover, steelmakers blamed speculative purchases of iron ore by Chinese buyers for the sharp rise in prices this month.

Fear of the tax that might be levied on Australian iron ore shipments to China is fueling stockpiling. There are suggestions that supply is deliberately limited in order to increase prices for raw materials for steel production. This concept was rejected by the respective miners.

Many industry analysts believe that the price of iron ore is too high compared to the current supply and demand balance. However, the cost of the key ingredient is expected to remain high in the short term.

Unfavorable weather conditions in Australia in the first quarter usually restrict production from mines and often cause logistics disruptions across the country. Consequently, there is unlikely to be a significant decline in the value of iron ore during this period.

Many of the world's steelmakers buy iron ore at indexed prices. This will put further pressure on mills to recoup the increased operating costs by increasing steel sales in the coming months.

Global average hot rolled coil prices have already risen by about 50% since the end of the cycle in July this year. Further significant growth in transaction value is projected in the first quarter of 2021. Rising prices for raw materials and other related products are likely to boost global steel prices.