The iron ore price has continued its early-2022 run, however, seaborne prices might not be able to maintain their momentum throughout the second quarter.
According to Mysteel, the price for 62 per cent Australian iron ore fines was trading at $US162.90 ($216.9) per tonne at the port of Qingdao on Wednesday.
This is a far cry from a price of below $US90 ($120.1) per tonne in November 2021 and comes as a wetter-than-usual monsoon season has quelled Brazil production. Output from Russia and Ukraine has also been halted amidst the ongoing conflict.
Despite this, S&P Global Platts believes Q2 expectations should be tempered, citing COVID-19 lockdowns and increased market supervision in China.
On Wednesday, China reported more than 20,000 COVID-19 cases, the country’s highest daily figure since the start of the pandemic. Given China is operating on a “zero-COVID” strategy, lockdowns could be a consistent theme across the next few months.
Fitch Solutions forecasts China’s economic stimulus to remain for the short-term, resulting in increased infrastructure investment, however the country’s constant real estate instability might counterweight iron ore’s future price trajectory.
As steelmakers become more discerning moving forward, Fitch believes Australian iron ore miners are best placed to benefit given the nation’s greater proportion of high-grade iron ore deposits.
“Australia accounts for a dominant share of the region’s project pipeline, with 66 new projects at various planning and investment stages compared to just four outside of Australia across Asia,” Fitch said in a report.
“Projects like Fortescue’s Iron Bridge, a project that will produce 22 million tonnes per annum of high quality (67 per cent iron content) magnetite concentrates, will allow miners to better serve steelmakers increasingly concerned with emissions reduction.
“Since higher purity ores generate less slag when run through blast furnaces, they require less coking coal to produce steel. The global green transition will continue to accelerate the deployment of greener furnace technologies such as electric arc furnaces, that reward ‘green’ iron ore supply chains.”