Iron ore prices hit a seven-year high

In terms of key ingredients for steelmaking, such as iron ore and coking coal, this week has been the story of two different markets.

The price of iron ore broke the $ 120 /t ($ 164.70 /t) barrier this week, the highest level since the beginning of 2014.

This is due to a stronger steel market in China, which is targeting large investments in its infrastructure.

According to Metal Bulletin, spot prices for 62% fine iron ore were around US $ 121.75 per tonne.

A week ago, shipments of iron ore delivered to ports in China were selling for about $ 116.85 a tonne, the pricing agency said.

There are market indications that Chinese demand for iron ore will remain strong throughout the economic cycle.

A dozen Chinese steel companies have entered into long-term supply agreements with Fortescue Metals Group (ASX: FMG).

The deals were negotiated on the sidelines of the China International Import Expo and included FMG's shareholder, Hunan Valin Iron & Steel Group.

Other steel companies in China such as Baotou Iron & Steel Group and Rizhao Steel have also signed contracts for the supply of FMG iron ore.

“China's steel industry continues to exceed expectations, with crude steel production reaching 782 million tonnes in the nine months to September 2020, and annual steel production is expected to exceed 1 billion tonnes in 2020,” FMG CEO Elizabeth Gaines said.

Steel product prices in China rise amid growing demand

Steel product prices in China are starting to rise, as are hot rolled coil and rebar futures prices in China.

The price of steel rebar (rebar), which is used in construction and concrete, rose to $ 605 per ton this week.

This is reportedly US $ 22 per tonne more than a week ago.

New environmental restrictions on steel mills in Tangshan are also creating demand for higher grade iron ore.

Higher quality iron ore requires higher prices in the shipping market and the costs are passed on to consumers along the supply chain; in this case, steel mills in China.

Iron ore shipments to China are skyrocketing

China's imports of iron ore rose to 106 million tonnes in October, up 15 percent from last year.

“China's demand for iron ore imports increased on the back of strong steel demand and positive margins for steel mills,” analysts from Commonwealth Bank of Australia said in a report this week.

Beijing has supplied its economy with stimulus money to offset the slowdown in activity due to COVID-19 restrictions earlier in the year.

"Infrastructure Sector Kit