Iron ore prices were closing in on triple digits on Wednesday as optimism about a quick recovery in China, where more than half the world’s steel is forged, combined with supply fears from Brazil, the globe’s number two supplier.
According to Fastmarkets MB, benchmark 62% Fe fines imported into Northern China were exchanging hands for $96.95 a tonne on Wednesday, just off 9-month highs struck Tuesday. On the Dalian commodities exchanges, iron ore futures climbed for a sixth straight session to $107 a tonne, up 20% from early April.
Iron ore prices have been underpinned by hopes that China, responsible for more than 70% of the world’s seaborne iron ore trade, will spend massively on infrastructure and construction to revive an economy devastated by the coronavirus.
Australia’s Financial Review quotes UBS’s global head of mining, Glyn Lawcock, as saying falling port stocks and a rebound in Chinese mill output has underpinned prices, but worries about supply from Brazil are behind the latest spike:
“Last year Brazil exported around 350 million tonnes. That’s 6.5 million tonnes a week. They’ve only had one week this year where they shipped above 6 million tonnes. The last three weeks they’ve shipped less than 4.5 million tonnes a week.
“Everyone’s asking the question, what’s wrong in Brazil? The first quarter you can blame weather, the wet season, but now weather is truly behind us as an excuse.
“Brazil is now number four globally in terms of covid cases. It’s really escalated. So I believe absenteeism in the workplace is hurting production.
“You can’t move dirt working from home.”