Iron ore prices soared to a two-month high as robust demand from Chinese steel mills rises despite three major Australian miners in stockpile delivery.
In the rally in Australia’s largest export, BHP, Rio Tinto and Fortescue Metals Group lifted the local stock market to a nine-month high on Monday while the Australian dollar hit its yearly highs.
The price of iron ore rose to $ 128. 83 per ton on Friday, the highest level since Sept.. September when it topped $ 130 per ton as suppliers rush to keep up with demand. China produces more than 90 million tons of steel every month.
BHP Group increased by 2. 5 percent to $ 37. 05, Rio Tinto advanced 1. 5 percent on $ 100. 89 and Fortescue Metals Group climbed 3rd. 9 percent to $ 17. 61.
« We have seen China’s steel demand at an all-time high for several months, » said Lachlan Shaw, director of raw materials research at NAB.
« [But] what was really missing was strong steel pricing, and that was because steel inventory was high. That has fallen rapidly in the last month. «
The strong performance of local miners raised the S&P / ASX 200 index by 22. 4 points or 0. 34 percent to 6561. 6, the highest level since Jan.. February.
Chinese demand for commodities offsets concerns over heightened tensions between Australia and its main trading partner, which have flared up in the form of tariffs on wine and lobster and statements in the Chinese media.
« The Chinese economy has recovered strongly from its pandemic and is a game changer for the global community, » said Ross MacMillan, senior research analyst at Morningstar.
A higher sustainable iron ore price would be welcomed by the government and could add around $ 22. 9 billion more to nominal GDP than originally forecast at an assumed price of 55 US dollars.
China, said Mr Shaw, was storing iron ore. « That’s usually a bearish indicator, but if you look at this inventory in days of usage, it’s actually still well below the long-term average, » he said.
« Australia has effectively delivered at record prices. It was this demand story that really supported the steel market and then the iron ore market as well. «
Emerging from the COVID-19 pandemic, China has invested heavily in the economy and poured money into the steel-intensive infrastructure and real estate sectors.
« The construction time for these projects is at least a year or two. So I expect we’ll see more construction well into next year, « Shaw said.
Hasan Tevfik of MST Marquee said he expects the growth in demand for iron ore to stabilize and slow down.
« This would be in line with weaker credit growth and the Chinese government’s own plan for 5 percent GDP growth, » he said.
As China enters winter, production will slow down. However, demand remained robust due to a warmer autumn.
« [It] means construction continued later than usual in the north, which has kept the market pretty healthy, » Shaw said.
« If winter demand is strong and you combine that with a slowdown in seasonal supply resulting in less iron ore coming from Brazil and you combine that with relatively strong demand from China, you can see the price well supported for the next six months. «
Even as China’s appetite for steel wears off, the massive boost expected from Europe and the US as they emerge from the pandemic should see them take the reins.
« As we go into the next year, you will see stronger growth in steel production outside of China, and this will help offset a slowdown in Chinese production growth, » Shaw said.
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Iron ore, steel, China
World news – AU – China is booming turbocharger iron ore
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