Iron ore price at fresh 5-year high

News that  Vale may be restarting full production at its 30m tonnes per year Brucutu mine sooner than expected did not stop traders from chasing iron ore to fresh 5-year highs on Friday. 

The Chinese import price of 62% Fe content ore advanced to $110.30 per dry metric tonne, according to data supplied by Fastmarkets MB. The price of the steelmaking raw material is up 52% year-to-date. 

The index price for 66% concentrate at the main Chinese port of Qingdao surged nearly 6% to reach $118.50 a tonne while Brazilian high grade (65%) exports now go for $123.70. 

Trade in iron ore futures inside China has become so furious that the Dalian exchange on Friday that raised trading limits and margins for the most active contract. Price movements of up to 8% is now allowed before a circuit breaker is triggered while margins will go up to 10% from 8%.

Dalian September futures gained more than 11% this week to $115.20 a tonne, the highest since the contract’s launch in 2013.

World no 1 iron ore producer Vale told  analysts that expects to restart the 20m tonnes capacity that remains suspended soon at Brucutu  and that it’s optimistic that output at other mines affected could be restored in part in the second half of the year.

Iron ore’s rally is primarily supply driven. Vale has suspended 93m tonnes of production (seaborne trade is over 1bn tonnes) following the deadly dam collapse while Western Australian output was hampered by storms. 

China imports more than 70% of the world’s seaborne iron ore and Beijing’s economic stimulus is  having an effect on demand. Chinese steel output is up by more than 10% so far this year and is now running at an annualized rate of over 1bn tonnes. 

A panel of 16 analysts polled by FocusEconomics expect prices to fall back by year-end as swing suppliers in China and India up production and supply from Brazil and Australia comes back on line,

The Barcelona-based independent research point out that there is a wide spread between forecasters suggesting a large degree of uncertainty. 

The highest forecast for the average price in Q4 2019 is $110 per tonne, while the lowest is $60.