With Brazil's Vale Focusing on Iron Ore, Will Currency Depreciation Help?

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Iron ore prices “may weaken to $100 a ton by 2016 after averaging $125 a ton this year,” according to data compiled by Bloomberg.

But in the shorter term, Brazil’s Vale SA is doing everything it can to stanch China’s metals demand slowdown, from cutting costs to selling some assets to laser-focusing on its iron ore business unit – but with some additional help from one of its friends.

That friend is currency depreciation.

From a recent Bloomberg story: “The real, the worst-performing emerging-market currency in the past three months, probably will weaken to about 2.40 from 2.15 per U.S. dollar, bolstering Brazil’s competitiveness, said Jose Carlos Martins, Vale’s executive director for ferrous and strategy.”

As Martins sees it, this should alleviate the pain from China’s 5-10% raw material demand slowdown (China accounts for 50% of Vale’s exports). According to the article, Chinese buyers are more into futures at this point, to hedge against inherent commodity price volatility that kicks in while iron ore and other raw materials are in transit.

So where are today’s iron ore and steel futures prices?

Current Steel and Iron Ore Prices

On Friday, June 14, the day’s biggest mover was the 3-month price of the US HRC futures contract, which saw a 0.8 percent increase to $605.00 per short ton. The spot price of the US HRC futures contract remained essentially flat at $600.00 per short ton.

today's metal prices - MetalMiner IndXChinese steel prices were flat for the day. The price of iron ore 58% fines from India hit a high price between $130 and $135 per dry metric ton. The price of Chinese HRC saw essentially no change for the fifth day in a row. For the fifth day in a row, the price of Chinese coking coal remained essentially flat.

The cash price of steel billet held steady last Friday on the LME, remaining around $130.00 per metric ton. On the LME, the 3-month price of steel billet saw little change in its price last Friday at $150.00 per metric ton.

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