Iron Ore Challenges Falling Global Commodity Prices

Global stock markets are declining from their recent peaks, and prices for commodities such as crude oil, gold and copper are also falling. But iron ore and coking coal are undermining this trend thanks to China, the world's largest consumer of the material.

Australian iron ore spot prices are around $ 80 /t, up 30% from late October. Prices are up 6% this month. Coking coal prices also rose 5% in the first half of February, topping $ 230 per tonne.

In 2017, China's economy grew at a faster pace for the first time in seven years, expanding 6.9% after adjusting for inflation. This is due to the increase in exports. Heavy infrastructure spending ahead of the Communist Party congress late last year provided an additional boost.

Chinese steel exports declined by a year for 18 straight months to January. “The drop in China's exports shows that its domestic demand is strong,” said Kiyoshi Imamura, managing director of Tokyo Steel Manufacturing.

Infrastructure currently accounts for over 20% of total investment in China, a record high. This indicates continued stability in steel prices.

China insists on further production cuts. In mid-November, the government ordered metallurgical companies to cut production to clean the air in 28 northern cities. This prevented oversaturation and kept the price from falling. To support the reduction and improve efficiency, the Chinese steel plant is increasingly using Australian high iron ore.

In January, China's iron ore imports totaled 100 million tons, up 19% from 84 million tons last month and 8 million tons, or 9%, from the same month a year earlier.