Commodity Market Report

Iron ore markets - short-term outlook - January 2021

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29 January 2021

Iron ore markets - short-term outlook - January 2021

Report summary

The wave of euphoria and optimism that drove prices higher in December gathered momentum in January, with the 62% index averaging $168/t. We never expected this, and we still don’t think it will last. But we’ve made the mistake before of getting too bearish too soon and given the resilience of Chinese steel production, distortions around Chinese New Year, and the fragility of seaborne supply, it’s still too soon to call a decisive turning point. But cracks are appearing. While Wood Mackenzie’s forecast for no growth in Chinese pig iron production this year is unfashionably bearish, we do sense that doubts are surfacing regarding the durability of this steel intensive growth push. More importantly, there is a limit to steelmakers’ ability to pass through such high raw material costs. When that limit is reached there’s only so much margin compression that can be absorbed before something has to give. A late January sell-off was a timely reminder that we might be approaching that limit.

Table of contents

  • A strong start – too strong?
  • Chinese steel and pig iron production – still growing!
  • Supply – downside risk
  • Chinese ore production remains high – but for how long?
  • India – on the road to recovery.
  • Ten year high!
  • High grade premiums just got higher!
  • Pellet premium recovery gathers pace
  • Technical indicators: Iron ore
  • Dry bulk freight market

Tables and charts

This report includes 26 images and tables including:

  • Pig iron daily production of CISA memeber companies
  • Crude steel daily production of CISA memeber companies
  • Chinese steel margins
  • Blast furnace utilisation rate
  • Exports: Q1-2021 (f'cast) vs Q1-2020 (actual)--selected producers/countries only
  • Production utilisation rate of 126 Chinese iron ore mine companies
  • Blast furnace burden ratios of sinter, pellet and lump (%)
  • Indian iron ore production (monthly)
  • Iron ore price – monthly, January 2014 to January 2021
  • Relationship between 65% Fe premium and Steel HRC price
  • Relationship between 65% Fe premium and hot metal spread*
  • Key quarterly forecast
  • 62% vs 65% forward curves
  • Differential 65%-62% TS over last few months
  • Onshore DCE most active contract vs offshore corresponding month (i.e. May 2021 contract)
  • Tubarao – Qingdao freight rate
  • West. Australia - North China freight rate
  • Capesize spot freights, US$wmt, to China (Beilun/Baoshan)
  • Iron ore loadings from W. Australia to China, Mt
  • % share of loadings to China
  • Chinese iron ore port inventory, Mt
  • Chinese iron ore port inventory, Mt
  • Seaborne exports of iron ore from Australia
  • Seaborne exports of iron ore from Brazil
  • Quarterly indicators: iron ore trade, crude steel and hot metal production (Mt)
  • Quarterly iron ore production - selected companies (Mt, 100% basis)

What's included

This report contains:

  • Document

    Iron ore markets - short-term outlook - January 2021

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