Iron ore hits 5-week high as China continues to forge steel near record pace
Iron ore prices gained again on Thursday hitting a five week high as optimism about Chinese economic growth and demand for steel returned to the market.
The import price of 62% iron ore fines at China's Tianjin port was $137.40 at tonne on Thursday, up more than 5% just in the last fortnight according to data supplied by The Steel Index.
The performance of iron ore is in stark contrast to other commodities including copper which has shed 4% over the last two days and crude oil which touched a 52-week low of under $78 a barrel today.
Iron ore is finding support after a surprise rate cut early June in China – the first since the global financial crisis – to stimulate the economy which has been growing at its slowest pace in three years.
The country consumes some 60% of the global supply of iron ore and produces almost half of the world's steel as its decade-long construction boom shows few signs of ending.
According to data from China's Iron and Steel Association the country's mills forged just under 1.99 million tonnes of steel per day over the first 10 days of June.
Output by China's large steel producers climbed over the 2 million tonne daily production rate for the first time in April. Growth in steel production in China is expected to slow to 6.5% this year from an average of 10% for the better part of the last decade.
Iron ore prices have found support at $130 a tonne this year – below that many domestic Chinese iron ore miners and high-cost producers elsewhere become unprofitable – recovering from a mini crash in October last year that saw the commodity touch a low of $116 a few weeks after hitting all-time record highs above $180.
In contrast to the steep drop-off in the price of coal used for power generation, coking coal which is crucial in the steelmaking process has also held up well staying above $200 a tonne this year. Heavy rains in Australia at the start of last year drove the price briefly to $300 a tonne, but historically $200 and above translates to robust reward for coking coal miners.
After falling from $235 per tonne to $211 at the Vancouver port for export to Asia in the current quarter, Anglo-American and others have inked July-September quarterly contracts for high-quality hard coking coal with Asian customers at around $225 a tonne.
Click here for MINING.com's dedicated iron ore pricing page.