Price movement recap
In May, the transaction activity for imported iron ore slowed down in China due to an general economic slowdown because China remains under threat from punitive US tariffs on Chinese imports. Then in June, the prices of iron ore fluctuated and in July, steel production restrictions due to China’s anti-pollution measures impacted China’s imports of iron ore : the demand of iron ore increased because China has to reduce its steel production. From August to October, prices of iron ore are gradually inscreasing.
Dynamic of supply and demand
Due to the new anti-pollution rules registered in the Three-Year Plan Action by the China government, the Chinese steelmaker imports more iron ore.
However, they are looking for a higher quality of iron ore in order to pollute less. This 2020 action plan to air quality is leading to steel producers to offer a rich iron ore on the market as reducing costs as well.
To illustrate this structural change, International mining and Resources Conference, on this Monday 29th of October until today, the 1st of November in Melbourne, the CEO of Rio Tinto Group, Jean-Sebastien Jacques suggests new ways of mining because the issues of the protecting air, water and land are more important more than ever. He considers that the mining has seen as an “old industry” that it is necessary to modernise by using automation and artificial intelligence (AI).
In that sense, as the CEO of FMG, Elizabeth Gaines is introducing autonomous trucks automatizing their ways to production to propose a best quality to the China demand because China demand still very strong.
Finally, this structural change concerns all of iron ore companies. For example, the emerging iron ore company Finders Mines Limites (FMS) rating in the Australian Securities Exchange which is focusing on the exploitation of the mines in the Pilbara region (western Australia ) operates with discount rates for lower-grade and high-impurity iron ore in order to improve the quality of their iron ore.
Recommandations
Since iron ore prices per metric tonne are constantly rising due to Chinese factors, we believe that it would be better to sell iron ore to earn a margin.
Sources
MB, F. (2018). ‘Structural change’ in iron ore market leads Flinders Mines to review options | Metal Bulletin.com. [online] Metalbulletin.com. Available at: https://www.metalbulletin.com/Article/3841133/Search-results/Structural-change-in-iron-ore-market-leads-Flinders-Mines-to-review-options.html [Accessed 1 Nov. 2018].
GmbH, f. (2018). Iron Ore PRICE Today | Iron Ore Spot Price Chart | Live Price of Iron Ore per Ounce | Markets Insider. [online] markets.businessinsider.com. Available at: https://markets.businessinsider.com/commodities/iron-ore-price [Accessed 1 Nov. 2018].
Creagh, B. (2018). Rio Tinto CEO targets a reinvention of mining – Australian Mining. [online] Australian Mining. Available at: https://www.australianmining.com.au/features/rio-tinto-ceo-targets-reinvention-mining/ [Accessed 1 Nov. 2018].
Eco-Business. (2018). China releases 2020 action plan for air pollution. [online] Available at: https://www.eco-business.com/news/china-releases-2020-action-plan-for-air-pollution/ [Accessed 1 Nov. 2018].
Mining-journal.com. (2018). “… no one at Fortescue is displaced as a result of automation”. [online] Available at: https://www.mining-journal.com/leadership/news/1341574/-…-no-one-at-fortescue-is-displaced-as-result-of-automation [Accessed 1 Nov. 2018].