The iron ore price has managed to stabilise around the US$120 a tonne level, providing some much-needed reassurance for the beaten up BHP Group Ltd (ASX: BHP), Rio Tinto Limited (ASX: RIO), and Fortescue Metals Group Ltd (ASX: FMG).
Last Friday, iron ore spot prices pushed US$2.59 or 2.2% higher to US$119.52 a tonne, according to Fastmarkets. Its commentary said that prices corrected upwards after a sharp decline on Thursday amid a bearish outlook for iron ore demand.
Iron ore futures on China’s Dalian Commodity Exchange opened higher on Monday, with contracts for January 2022 delivery lifting 4.65% to around 710 yuan (US$111) a tonne.
Iron ore price headlines
Commodity boom at risk, Fitch says
Commodity prices have enjoyed favourable macro factors including the restart of economic activity, relaxation of COVID-19 restrictions, and a strong rebound in industrial activity. That’s in addition to plenty of government fiscal and monetary support, Fitch said.
Prices were further fuelled by a decline in commodity output, driven by COVID-19-related restrictions, extreme weather events, and shipping capacity constraints.
In a note to clients, Fitch warned these factors are now beginning to wane with China’s property market slowdown already resulting in a plunge in iron ore prices.
“China’s property market is cooling, the pace of global industrial production growth is slowing, the US dollar has started to strengthen and global US dollar credit flows are weakening,” said Robert Sierra, Director in Fitch Ratings’ Economics Team.
Fitch flagged near-term tailwinds such as tightening monetary conditions as the US Federal Reserve begins to taper its asset purchases as well as a firmer US dollar.
China aims to keep steel supply and price stable
The China Iron and Steel Association (CISA) told industry players to ensure supply while keeping prices stable, according to Mining.com.
Policymakers said that “it is necessary to pay close attention to recovering global steel production, adjusting production and improving industry governance”.
This follows China’s daily crude steel output in September sliding to an almost three-year low, according to Reuters calculations.