The price for iron ore surged to a record US$237.57 per tonne on May 12 as strong Chinese demand continued to outpace supply.
The record price levels are supported by a continued supply squeeze, with major iron ore producers reporting seasonally lower output in the March quarter, and growing concern over the escalating Covid-19 crisis in India, which could impact the country’s exports of the metal.
“These factors, along with a recovery in ex-China demand, is expected to drive the global seaborne trade balance into a deeper deficit in 2021, with annual prices forecast to average US$153 per tonne,” Ronnie Cecil, principal analyst for metals and mining research at S&P Global Market Intelligence, tells The Northern Miner, although he notes a seasonal rise in Brazilian exports are likely to lower prices in the second half of the year.
CRU Group principal analyst Erik Hedborg attributes the record price run in part to recent production cuts in the city of Tangshan in China’s northeastern Hebei province, which he says have boosted demand for higher quality ore. It has also prompted mills to build iron ore inventories as their margins are on the rise.
“Iron ore producers are enjoying exceptionally high margins as well; around two-thirds of seaborne supply only require prices of US$50 per dry metric tonne to break even,” Hedborg states in a May 6 research note to clients.
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