Beijing’s crude steel production is ramping up iron prices. The iron ore prices have climbed to record levels unable to keep up the momentum with the Chinese demand which has gone up by 30% over the past five years.Beijing’s crude steel production is ramping up iron prices. The iron ore prices have climbed to record levels unable to keep up the momentum with the Chinese demand which has gone up by 30% over the past five years.
Experts are suggesting the benchmark prices can reach up to $200 a tonne from the previous record of $194 over 10 years ago. The forecast comes in the wake of Chinese steelmakers boosting their production going against the government’s attempts to curb the production so that the carbon emissions can be controlled.
Meanwhile, the benchmark 62% iron ore imported to Northern China exchanged hands for $192.54 a tonne last week. This is 1.95% more than the previous day, according to a popular firm.
A senior analyst from a reputed consultancy was reportedly heard as saying that iron ore prices could surge higher in the near future and go beyond the $200 per tonne. The price concerns can be read in the context of the supply and how much steel can China produce, the analyst added.
It is also being said that the surge of 14% is helping drive the commodities rally from Asia too North America. This is particularly important in the spotlight of the boom in the Chinese economy where you can see loads of measures being taken to push steel mill profitability to the highest. This is the maximum it has reached in a decade.
High Margins
So what do these high mill margins do? Experts analysing the scenario say that these high margins encourage steel mills to increase stocks and bring in more quality iron thus boosting stocks. An expert also sees this demand for the purpose of topping the inventories.
Meanwhile, American multinational investment bank and financial institution Morgan Stanley sees Beijing’s supply reforms to be a game changer and feels that the demand for premium iron ore is not quite likely to return to normalcy in the near future.
Another investment enterprise, Citigroup has forecasted benchmark prices to touch $200 within weeks. It has also said that there will be a deficit of 18 million tonnes during the first three quarters of 2021. Previously, the bank had stated a 1 million tonne surplus.
Steel output on track to cross 1bn tonnes
Beijing’s slew of changes to rebates on export taxes are also not expected to restrain the steel output as the country heads towards crossing the 1bn tonne mark second time consecutively.
China has to watch out for its domestic demand if it wants to slow down its steel production, said an expert monitoring the current situation. He said that there are chances of steel demand dipping a bit as the government brings in additional measures and this might also impact the prices very soon.
Meanwhile, China’s Iron and Steel Association was reported to be terming the iron ore prices to be exorbitant and that there is need to monitor at both the domestic and international levels. This is also expected to affect the rules of the market.
However, analysts are expecting prices to cool down over the duration of the year. They say there are many factor contributing towards it.
From some resistance to price increase to stringent credit conditions, iron ore prices are likely to see downward trend by late April, S&P Global is quoted to have said in a note to investors.
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