Brazil may gain iron ore share
Move will replace raw material from Australia
Chinese demand for iron ore, a key raw material for making steel, is on the rise -- and Brazil is expected to seize a bigger market share despite a slump in May shipments, Chinese experts said on Tuesday.
As a palpable sense of rising trade tension between China and Australia grips industry players, some are expected to switch to Brazilian and South African iron ore, industry experts said.
The world’s second-largest economy is recovering from the impact of the COVID-19 pandemic, with a key focus on new-type infrastructure construction, and demand for steel keeps rising.
Iron ore stockpiles at 45 Chinese ports are near four-year lows, coupled with a surge in the price of iron ore futures, according to a Futures Daily report on Tuesday.
From April, the price for iron ore futures has risen by 43 percent, domestic news portal 21jingji.com reported on Tuesday. The September-dated futures on China’s Dalian Commodity Exchange closed at 757 yuan ($106.6) per ton on Tuesday.
Although the Chinese government has so far taken no action to curb Australia’s $63 billion iron ore exports to China, and Australian miners are reportedly ready to increase output, Chinese experts warned that the landscape could change within the year.
The current high price of iron ore will weigh heavily on Chinese steel mills if it persists, and they are “eagerly seeking to diversify their import sources”, Wang Guoqing, research director at the Beijing Lange Steel Information Research Center, said.
“The price is being pushed up mainly by short-term factors such as the lack of cargo ships sailing between China and Brazil as a result of the pandemic,” Wang said. “It is also being driven by a surge in demand in the Chinese market as factory utilization picked up after the virus was contained.”
Strong demand plus rising prices make China an attractive market in 2020 for miners in Australia and Brazil, which together supplied 83 percent of Chinese iron ore imports in 2019.
Australian iron ore exports have appeared to be immune to ChinaAustralia trade tensions, with a firstquarter increase of 6 percent yearon-year, according to the Australian Bureau of Statistics.
Brazilian exports to China rose 103 percent year-on-year in April to 16.393 million tons, data from Chinese domestic steel information site lgmi.com showed. But the country’s May exports to global markets went down 28.2 percent to 21.50 million tons.
Citing reasons including the coronavirus outbreak, Brazilian miner Vale in April revised down its 2020 output guidance to 310-330 million tons from 340-355 million tons.
However, these problems haven’t kept Brazil from gaining share in the Chinese market and this may not bode well for Australia’s iron ore ambitions, Chinese experts said.