SINGAPORE – High-grade iron-ore may spike to $100 a metric ton as China intensifies a clampdown on pollution by restraining industrial activity, adding further momentum to a trend that’s reshaped the global market in recent years and driven buyers in Asia’s top economy to seek out better-quality material.
After sinking in March, top-quality ore with 65% iron content gained every month, hitting $91/t on Friday, and keeping it in positive territory this year even as global trade frictions mounted, according to Mysteel.com.
In contrast, benchmark 62% ore has flat-lined in the $60s, and is down 14%. The divergence has exploded the gap between the two.
“Short-term spikes to this level are entirely possible in response to Chinese production and policy announcements,” said Paul Gray, VP for iron-ore markets at Wood Mackenzie, referring to the $100 mark for top-grade prices. While WoodMac’s view is that high-quality ore won’t trade in three figures on a sustainable basis, spreads are expected to remain wide.
In a market characterized by extraordinary quantity – global iron-ore shipments top 1.6-billion tons a year – the sustained push for quality among buyers stands to benefit top miners Rio Tinto and BHP Billiton in Australia, as well as Brazil’s Vale as it brings on new high-grade deposits.
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