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Iron ore jumps to 6-month high, coking coal binge continues

Most of the heavy lifting was done in 2017

The import price of 62% Fe content ore at the port of Tianjin jumped nearly 2% to $62.70 per dry metric tonne on Wednesday building on a 5% advance on Tuesday according to data supplied by The Steel Index.

That was the highest level for the Chinese benchmark price in nearly six months.  Year to date the price of the steelmaking raw material is up 46% after surging by two-thirds in value from near-decade lows in December last year. The average price for 2016 in $54 a tonne, in line with last year, but much higher than even the most upbeat predictions.

Metallurgical coal’s rise this year has been even more dramatic than that of iron ore and trading at $270.80 a tonne on Tuesday, the steelmaking raw material is up 27% so far in October. According to data provided by the Steel Index premium Australia hard coking coal prices are up more than three-fold since hitting multi-year lows around $70 a tonne in November last year.

Glencore this week settled contract prices with Japanese utilities at $94.75 a tonne, up from around $64 the previous quarter

Seaborne prices for coal used in power generation has nearly doubled in 2016 exchanging hands for $93.20 a tonne on Wednesday after touching an intra-day high of $97 earlier this week, up 21% just since the start of October. The last time Newcastle thermal coal export prices traded in triple digits was May 2012.

Iron ore jumps to 6-month highMost coal business is still conducted on a quarterly contract basis and Reuters reports Glencore this week settled prices with Japanese utilities at $94.75 a tonne, up from around $64 the previous quarter.

Supply down

China, which consumes more than 70% of the world’s seaborne iron ore trade, imported 93 million tonnes in September, only slightly below the record 96.3 million tonnes hit in December last year. Shipments for the first nine months are up more than 9% from 2015’s record setting pace and on track to breach 1 billion tonnes for the first time.

Last week top iron ore miner Vale reduced its production outlook for 2017 to 360m–380m tonnes, below its original forecast for 380m–400m tonnes. The Rio de Janeiro-based giant said 2016 production would be at the lower end of a range of 340m–350m tonnes.

In 2011 floods in key export region in Queensland saw the coking coal price touch an all-time high $335 a tonne

Number two producer Rio Tinto also cut its outlook for this year’s shipment by as much as 5 million tonnes, hampered by logistics bottlenecks at its Pilbara operations in Western Australia. The Melbourne-based company expects to ship around 325m tonnes this year, rising slightly to between 330m – 340m tonnes in 2017.

The coal rally was also spurred by supply issues after Beijing’s decision to limit coal mines’ operating days to 276 or fewer a year from 330 before as it seeks to restructure the industry. Safety closures and weather related supply curbs in China and Australia only added fuel to the fire.

China imported 24.3 million tonnes of coal in September, up more than 33% compared to last year according to official customs data. Over the first nine months of the year imports increased 15% to 180 million tonnes compared to the same period in 2015.

In 2011 floods in key export region in Queensland saw the coking coal price touch an all-time high $335 a tonne. Steam coal peaked just shy of $140 a tonne in January 2011. Iron ore’s high point was a month later at $191.90 a tonne.