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Iron ore spot price hits new high in China
Feb 25, 2010
The iron ore reference price for 62% Fe content fines hit a new high on 25 February 2010, reaching US$ 133.10 per dry metric tonne (dmt) CFR Tianjin port in China. This price represents a 125% increase since March 2009, when the price dropped to US$ 59.10/dmt.
After falling from its previous high of US$ 131.20/dmt on 8 January 2010, in line with falling freight rates for dry bulk carriers on the key routes to China at that time, the price has increased steadily since early February.
Significantly today’s spot price is approximately double the current annual fixed-price ‘benchmark’ level on an FOB Australia basis. Negotiations are underway between representatives of the Australian miners and Chinese steel mills to try to reach agreement on a benchmark level for 2010-11. Last year, no agreement was reached between these parties and many commentators remain skeptical about whether one will be reached this year.
The latest iron ore price increases have occurred following the Chinese New Year holiday last week and may be driven in part by anticipation of the outcome of India’s budgetary committee meeting tomorrow. This will discuss whether to increase the current export tax on iron ore, with many observers expecting a rise for fines from 5% to 10-15%..
Chinese steel mills’ requirement for iron ore has increased through 2009 and into 2010 in line with rising steel production (up 13.5% in 2009 to 568 mt), further fuelled by the country’s increasing levels of spending on steel-intensive infrastructure projects. Chinese steel prices also look set to rise after recent falls in some product areas, with leading Chinese steelmaker Baosteel announcing on 12 February that its March prices will increase by RMB 200-700/tonne ($29-103/t), according to international analysts.
The iron ore swaps market has grown strongly over the past year, hand-in-hand with the increasing use of spot prices in physical market transactions. Since the Singapore Exchange launched the world’s first cleared iron ore swaps contract on 27 April 2009, followed by LCH.Clearnet in London, around 10 million tonnes has been cleared with a value of over US$ 1 billion.
In addition, make sure to read these articles:
Iron ore spot price hits new high in China
Iron ore price rises of near 20 % predicted next year
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