Iron Ore

ArcelorMittal and Liberian President George Weah have announced a 25-year commitment to stay in Liberia. Through the deal, the steelmaker will triple its iron ore production in the country and invest an additional $800 million. The steelmaker said it has invested $1.7 billion in the country over the last 15 years.

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ArcelorMittal invests in Liberia

ArcelorMittal logo

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The steel and mining company had initially signed a 25-year agreement with Liberia in 2005. It shipped the first iron ore from its Yekepa mine in 2011.

During the newly signed first phase of expansion, annual production would reach 15 million tons (MT), with the potential of reaching 30 MT a year, ArcelorMittal Executive Chairman Lakshmi Mittal said at the signing ceremony.

ArcelorMittal will provide the government with a total of $65 million from the production of 15 million MT of iron ore in three years. Since the end of a 1989-2003 civil war, the mining and agriculture potential of Liberia has attracted billions of dollars in resource investments. However, the country’s infrastructure remains underdeveloped and the majority of its 5 million people live in poverty.

Going green

Of late, the UK-headquartered ArcelorMittal has been in the global headlines for its determined drive on the “green steel” and clean energy fronts, joining the trend of steelmakers foraying into green hydrogen and increasing the footprint in renewable power generation.

Just last week, Germany pledged to offer funding of $65 million toward of ArcelorMittal’s investment of 110 million euros ($131 million) in a hydrogen plant powered by renewable electricity.

German Environment Minister Svenja Schultze said Berlin would pay 55 million euros — subject to EU approval — toward a new direct reduced iron (DRI) plant. The plant will use green hydrogen to reduce iron ore in a CO2-free steelmaking process.

By 2025, ArcelorMittal Hamburg’s Chief executive Uwe Braun expects his company to produce 100,000 tons of DRI for steelmaking with green hydrogen from the plant.

ArcelorMittal invests in Indian solar power

Elsewhere, in India, ArcelorMittal plans to invest in solar energy in the Indian provinces of Rajasthan & Gujarat.

According to a report by pv magazine, Group Chairman Lakshmi Niwas Mittal met representatives of the local governments in Rajasthan and spoke of setting up a 4.5 GW solar park at an investment of about U.S. $2,586 million (Rs 19,000 crore) in the province. The plant is to be set up by ArcelorMittal arm HPCL-Mittal Energy Limited.

In another meeting with the Gujarat officials, Mittal also expressed his intention of investing about U.S. $6,809 million in Gujarat’s solar energy, wind energy and hydrogen gas production sectors.

ArcelorMittal currently produces DRI using grey hydrogen, which comes from natural gas. In a green hydrogen system, the hydrogen is produced by using renewable energy sources, like wind or solar power, and then run through an electrolyzer.

ArcelorMittal would have achieved its goal of expanding output to 15 MT per year would have been accomplished much earlier, but the Ebola outbreak in 2014 disrupted its expansion plans in Liberia, for which it declared force majeure.

ArcelorMittal said the project will generate more than 2,000 new jobs during the construction phase.

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Diplomatic relations between China and Australia have been strained over the past year.

However, that does not seem to have affected trade between the two nations.

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China-Australia trade

China and Australia flags

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After posting record exports in May and June 2021, Australia recently announced a new record in July. Exports of iron ore, coal and liquefied natural gas exports all rose strongly, giving Australia a record trade surplus, plus a boost to mining profits and tax revenue.

“Non-rural goods rose $2,275m (7%), driven by other mineral fuels, metal ores and minerals and coal, coke and briquettes,” the Australian Bureau of Statistics reported.

“The increases in other mineral fuels and coal, coke and briquettes were driven by LNG and thermal coal, respectively. Increased exports to Northern Asian countries coincided with an unseasonably warm northern summer.

“The increase in metal ores and minerals was driven by iron ore on the back of strong demand from China.”

In July, total exports, including services, reached a record of A$45.95 billion.

The Australian Bureau of Statistics reported the trade surplus climbed to A$12.1 billion (US $8.91 billion) in July. The surplus reached an already high A$11.1 billion in June.

Overall, exports were up 5% because of strong demand from Asian countries for LNG and thermal coal, combined with higher prices for iron ore, Reuters reported.

Imports rose 3% to $33.8 billion, largely due to a sharp increase in parts and accessories for telecommunications equipment.

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A year ago, China fired the first salvo across Australia’s bow by amending iron ore screening provisions.

This was perceived by the rest of the world as Beijing targeting Australian iron ore supply because of the latter’s support for a probe of the origins of the COVID-19 pandemic.

So, now is a good time to analyze how things stand on the iron ore supply situation.

In fact, not just iron ore supply, but the frosty relationship between the two countries has also affected commodities trade in things like coal and barley, to name a couple.

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China-Australia tensions and iron ore

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In May this year, China suspended economic dialogue with Australia. The Australian government, led by Prime Minister Scott Morrison, is not budging yet. However, China continues to be Australia’s biggest trading partner.

What has irked the Chinese even more is the Morrison government’s increasing closeness to some of the Western powers, particularly the United States. a move that the Chinese have called,“a Cold War” mindset, the AP reported.

So where does all this leave the global iron ore supply?

Also, can the Chinese really ignore supply from Australia?

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China’s increased appetite for iron ore has become a problem for neighbor India.

In the first four months of 2021, ore exports from India increased by 66% to 22.42 million tons (MT). As much as 90% of this went to China, according to Business Today.

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India’s iron ore problem

India iron ore barge

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China is the largest consumer of iron ore. The country imports about 70% of the world’s production. Last year, it imported a record 1.17 billion tons.

The spike in iron ore exports is becoming a problem for Indian steelmakers, as they are struggling to get this critical raw material. Some have now demanded that the government ban iron ore exports from India.

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iron ore stockpile

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The iron ore price has been about as volatile of late as most of us can remember.

The price powered relentlessly upwards this year on the back of surging demand from China and constrained supply from Brazil.

Then, after hitting a peak May 10 and 12, it fell sharply into bear territory, as Beijing sought to dampen inflationary raw material costs by issuing a string of warnings about speculation and excessive pricing.

Having achieved its objective in dampening prices, you would think Beijing would have left it at that.

But last week, China’s Ministry of Industry and Information Technology said it will seek to establish a mechanism to contain steel output based on carbon emissions, pollutant discharges and energy consumption, Bloomberg reported.

The MetalMiner Best Practice Library offers a wealth of knowledge and tips to help buyers stay on top of metals markets and buying strategies.

Iron ore bounces back

Iron ore promptly bounced back, climbing more than 6% in Singapore. Meanwhile, steel futures in Shanghai recovering on fears of constrained steel supply.

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China’s “zero tolerance” warning to commodity speculators over the weekend sent prices of some metals and iron ore tumbling.

A meeting held on Sunday between at least five government departments, including the the National Development and Reform Commission (NDRC), concluded that the fight against hoarders and speculators leading to soaring commodities prices would be taken to the next level.

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Beijing aims to control runaway prices, warns commodity speculators

China map

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Bloomberg reported the government had also threatened severe punishment for violators indulging in excessive speculation and fake news in the trading of commodities including iron ore, steel and copper.

The NDRC summoned top metals producers to the meeting in Beijing.

Let’s not forget that China is the largest consumer of some of these commodities, like iron ore and copper. The prices of these commodities have surged this year, as the global economy partially recovered from the COVID-19 pandemic. In turn, that has led to renewed demand for manufactured goods.

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Iron ore prices’ relentless rise this year went into overdrive Monday, hitting a +10% limit up and prompting the Dalian Commodity Exchange to raise trading limits and margin requirements in an effort to calm speculation.

Separately, the Shanghai Futures Exchange said it would set fees for closing positions on its steel rebar and hot-rolled steel coil futures contracts at 0.01% of the total transaction value. Those transactions had previously been free.

bulk cargo iron ore

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Meanwhile, on the Singapore Exchange, the June contract for iron ore leaped 10.3% to a record $226.25 per ton.

Despite fears this would squeeze mill margins, sales prices moved in tandem. The South China Morning Post reported nearly 100 Chinese steelmakers adjusted their semi-finished steel prices sharply upwards yesterday to compensate.

The MetalMiner Best Practice Library offers a wealth of knowledge and tips to help buyers stay on top of metals markets and buying strategies.

Strong iron ore demand

Iron ore prices have been rising on the back of strong demand. Increases of this magnitude and at this speed could not occur in a weaker demand environment.

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This morning in metals news: MetalMiner’s Stuart Burns weighed in on the outlook for iron ore prices and steel prices throughout the remainder of this year; the unemployment rate was unchanged in April; and the copper price has soared past the $10,000 per metric ton mark.

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Iron ore prices likely to remain elevated

bulk cargo iron ore

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Commenting on MarketWatch, MetalMiner’s Stuart Burns said steel prices are likely to lose some steam in the second half of the year. In turn, so will iron ore price.

However, the drop is not likely to be significant. In fact, he noted he expects prices to remain elevated for the balance of the year.

“Iron is experiencing a perfect storm at the moment, Beijing’s environmental constraints are having a two-pronged impact on prices,” he told Marketwatch.

Unemployment unchanged in April

US unemployment checked in at 6.1% in April, the Bureau of Labor Statistics (BLS) reported.

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This morning in metals news: MetalMiner released its May MMO report earlier this week; US crude oil imports from OPEC are down; and the International Energy Agency issued a report on clean energy and the expected surge in critical mineral demand.

The MetalMiner Best Practice Library offers a wealth of knowledge and tips to help buyers stay on top of metals markets and buying strategies.

May 2021 MMO report

Earlier this week, MetalMiner released its May 2021 Monthly Metal Outlook (MMO) forecast report.

The report — available only to subscribers — offers detailed analysis of 10 key metals. The coverage includes support and resistance figures, price drivers, buying strategies and much more.

Visit the MMO landing page for more information.

US crude oil imports from OPEC decline

US crude oil imports from OPEC nations have declined, the Energy Information Administration reported.

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Tangshan steel plant

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The recent curbs on steel making by the local government in one of China’s largest steel-producing cities, Tangshan, may have a cascading effect on steel procurement & demand, as well on iron ore supplies, some experts believe.

The Tangshan restrictions are in effect from March 20 to Dec. 31, 2021. Among other things, the restrictions penalize steel mills there that fail to meet emission control regulations.

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Tangshan part of countrywide effort

The curbs are in line with China’s fresh efforts to cut emissions meet carbon-neutrality targets. China aims to reach carbon neutrality by 2060.

Already, iron ore prices felt effects from the restrictions. Meanwhile, the long-term effect on the import-export of steel from China remains to be seen.

Daily iron ore consumption in Tangshan is also likely to drop drastically. The restrictions had led to the drop in iron ore futures but boosted hot-rolled coil (HRC) futures.

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