2019-10-22 09:45:491970-01-01 00:00:00

China Iron Ore Prices Leap

After the fatal dam failure in January this year, the trust crisis of the global iron ore giant Vale dam structure has been intensified. Vale said in early April that it had suspended the operation of 10 mines in Minas Gerais in southeastern Brazil due to the failure to obtain stability certification for these mine structures. The company’s external inspectors also refused to issue safety certificates for the other eight mines in the evacuated areas of Vale, which are considered to be at risk.

Since the dam break, the iron ore price on the Singapore Exchange has soared 37%. As the largest supplier of iron ore, Vale’s production capacity fell by 93 million tons after the disaster. According to the Vale, it would take around two to three years to achieve its previous 400 million tons production target. According to the official Brazilian trade data, Brazil’s iron ore shipments in April were 18.34 million tons, which is a 29% decrease from the corresponding period of last year. Ship tracking and port data compiled by Refinitiv, show that Brazilian iron ore exports in the first four months of 2019 were 97.2 million tons, down from 111.9 million tons in the same period of 2018. It is difficult for Vale’s competitors to fill this supply gap.  

At the same time, Australian mining giant BHP Billiton estimated that the tropical cyclone in early April has reduced the company’s iron ore production by 6 to 8 million tons. Data show that Australian iron ore exports in the first four months of 2019 were 259 million tons, down from 280 million tons in the same period last year.

The total shipment of these two major iron ore exporters, Brazil and Australia, fell by 3,570 tons in the first four months of 2019. Iron ore supply and demand structure changes with the global iron ore supply tension, which led to a continued increase in iron ore prices.  Goldman Sachs raised its average iron ore price target for 2019 from $81 per ton to $91 per ton.

Impact on China

China is one of the largest steel producers in the world. Its demand for iron ore is enormous. The output and quality of China’s domestic iron ore cannot meet with its steel production demand. Therefore, it needs a large amount of imported iron ore from the international market. Based on the data released by China’s General Administration of Customs, it has imported about 1.06 billion tons of iron ore in 2018.

China’s iron ore price rose significantly on Monday, hitting a five-year high, along with the steelmaking raw materials rose, supply was constraints as the country’s port inventory reduce further, whereas demand may increase again. As of last week, China’s port iron ore stocks reached 121.6 million tons, which is the lowest level since the beginning of 2017. Inventories have steadily declined from the 2019 first half year highest point (around 150 million tons) in the past four weeks.

Although China’s iron ore imports recovered in May from the April 18-month-low, the shipments of last month were still significantly lower than last year due to the output disruptions in Brazil and Australia.

According to the China General Administration of Customs, as the world’s largest iron ore consumer, China has brought 83.75 million tons of iron ore last month, which is an increase of 3.7% from April, but 11% lower than May 2018. Moreover, China has imported 423.92 million tons of iron ore in the first five months of this year, down 5.2% from the same period in 2018. The most active iron ore contract on the Dalian Commodity Exchange rose 3.2% to close at 729.5 yuan ($105.24) per tonne, away from the three-week low hit on Thursday, before the Chinese market closed for the long weekend.

According to data from Singapore-based steel and iron ore data analysis company Tivlon Technologies, iron ore demand will pick up again in the next few weeks as the supply shortage.

Tivlon’s data scientist Darren Toh claim that Tivlon’s analysis “emphasized a further rise in ferroalloys” and added that China’s infrastructure projects will continue to support the demand for iron ore. He also said that by August, the spot price of iron ore may reach $120 per ton. Other steelmaking components were stronger as well, coking coal rose 2.8% to 1,415 yuan per ton, while coke rose 0.7% to 2126.5 yuan.

Considering the high profit generated by high iron ore prices, it is less likely for Brazil and Australia to consider increasing the supply in the short term. According to Argus Media, the 62% iron ore benchmark price delivered to China closed at $94.05 per tonne on Monday, up 29% from the end of last year. However, if Brazil and Australia continue to maintain such a small supply of iron ore, it is possible that the big buyers will have to find new suppliers.

By Louis Cai

Click here for a 7 days access to our Lotus Blue Portal.

KOSEC does not take into account the investment objectives, financial situation and advisory needs of any particular person, nor does the information provided constitute investment advice. Under no circumstances should investments be based solely on the information provided. KOSEC is intended to provide general information only. Please be aware that investing involves the risk of capital loss. This message is confidential and may be privileged. It is intended only for the use of the addressee named above. If you are not the intended recipient, any unauthorised dissemination, distribution or copying is illegal. We do not guarantee the security or completeness of information hereby transmitted and are not liable in either respect or in respect of any delay. Nothing in this message is intended as an offer or solicitation for the purchase or sale of any financial instrument. Any market prices or data, unless specifically verified and identified as such, are not warranted as to completeness or accuracy. Kodari Securities Pty Ltd (KOSEC) is a Corporate Authorised Representative (No. 399 556) of Longhou Capital Markets (AFSL No. 292464) which is regulated by the Australian Securities and Investment Commission (ASIC). KOSEC wishes to disclose that KOSEC and its staff may hold stock they recommend in their own portfolios and that any decision to purchase recommended stock should be done so after the purchaser has made their own inquires as to the suitability to their own requirements. Click here to view our FSG.

KOSEC Terms & Conditions

Kodari Securities Pty Ltd (CAR 399556) trading as KOSEC is regulated by the Australian Securities and Investment Commission (ASIC). KOSEC is a financial services company and any information provided by its platforms, portals, reports and documents is protected by copyright. Any unauthorised production of this information is prohibited.
KOSEC reserves the right to change or remove any information provided on our website, reports or any documents including these terms and conditions at any time without notice. The change or modification to the terms and conditions will be effective immediately upon posting an updated version on our website, necessary platforms and documents. It is recommended that you review the information provided on our website, including these terms and conditions frequently for any changes.

KOSEC provides general advice only. The information provided is of a general nature only and does not take into account your individual objectives, financial situation or needs. It should not be used, relied upon, or treated as a substitute for specific professional advice. KOSEC recommends that you obtain your own independent professional advice before making any decision in relation to your particular requirements or circumstances. Please make sure you read our Financial Services Guide (FSG).

KOSEC does not guarantee any returns. Past performance of any product discussed is not indicative of future performance. (We urge that caution should be exercised in assessing past performance. All financial products are subject to market forces and unpredictable events that may adversely affect their future performance). Investing in the stock market can incur huge losses. Please also be aware that fees will incur on every transaction regardless of the performance of your investments or returns generated. Employees and or associates of KOSEC may hold one or more of the stocks, securities or investments reviewed by the company.

Your use of information from our website, reports, documents and from talking to our representatives/associates is at your risk. Under no circumstance should the investment be based solely on KOSEC information and general advice. You should seek professional financial planning advice.
KOSEC aims to maintain the accuracy of the data and information provided on this website, by using information prepared from a wide variety of sources, which KOSEC to the best of its knowledge and belief, considers accurate and does not make any representations or warranties of any kind, expressed or implied, about the completeness, accuracy, reliability, suitability or availability of the information provided.

We may at times refer to third parties, which the details of these third parties have been provided solely for you to obtain further information about other relevant products and entities in the market. KOSEC has no control over the information third parties have, or the products or services offered, and therefore make no representations regarding the accuracy or suitability of such information, products or services. You are advised to make your own enquiries in relation to third parties. Our inclusion of any third party content is not an endorsement of that content or the third party.

As a client you will be charged a yearly service fee and a set brokerage fee per transaction. Your service fee will automatically renew at the end of your agreed 12 month period at the same rate advertised at the time. Your credit card or bank account will be charged for a further year following which will again auto renew until you cancel your yearly service fee. You can cancel the auto renewal at any time in advance of the renewal date by contacting us. KOSEC is aware of the need to ensure the security of your credit card details and our payment systems are compliant with the Payment Card Industry (PCI) Data Security Standard.

You consent to receiving email correspondence from KOSEC, as well as companies KOSEC has an association with. These emails will be sent by KOSEC and third party companies. You can opt out of receiving any category of emails at any time by contacting us. We may from time to time inform you of special offers, or even ask your opinion of the services we provide, but your involvement is optional. Should you request us to do so, we will archive your details.

Indemnity and Liability
You indemnify KOSEC from all claims or threatened claims, suits, demands, damages, costs as well as including legal costs incurred in dealing with any threatened claim, expenses made by any person or corporation against KOSEC and any other amounts which is caused by KOSEC providing information, execution and General Advice.

You hold KOSEC harmless and release it from any liability in respect of any loss, harm or damage arising from a decision made by you on the basis of information obtained through the use of our portal, reports, documents or any General Advice given and any transaction taken place.

You hold KOSEC harmless and release it from any liability in respect of any loss, harm or damage arising from delays in executing orders for the client and acknowledges KOSEC makes no guarantees about the time taken to execute an order on behalf of the client. You acknowledge that KOSEC relies on third parties in providing technology and release KOSEC from any harm, loss or damage you may suffer as a result of the failure of such information technology.

Cookies and Links
KOSEC website, and its portal uses cookies, which lets us identify your browser while you are using the site or our portal. Cookies do not identify you personally. They simply allow us to track your usage patterns. If you prefer not to receive cookies, you can configure your browser to reject them or to notify you when they are being used. The functionality of the KOSEC website may be impacted if you restrict the use of cookies.

Fill up the form below and we will get back to you as soon as possible.



KOSEC’s CEO, Michael Kodari’s new book, “Stock Market Success” valued at $39.95, available at Dymocks book stores with all the proceeds going to Dymocks Children’s Charities.


Latest TV Commercial