ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronEye IconIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailMenu BurgerPositive ArrowIcon PrintIcon SearchSite TitleTitle ChevronIcon Twitter
Commodities

Iron ore soaring as China's imports surge

Rally lifting steel prices across Asia

 (placeholder image)
An iron ore mine in Australia.   © Reuters

TOKYO -- International iron ore prices have climbed 20% this year on the back of strong Chinese demand, sending steel prices higher in Japan and across Asia.

The spot price of Australian ore, an international benchmark, now tops $90 per ton, double the price from a year earlier.

China's ore imports in January surged 12% on the year to 92 million tons as a rebound in steel prices bolstered demand for the base material. Brisk real estate development and the proliferation of public works projects such as new railways underpinned that rally. Meanwhile, efforts by the government helped cut production capacity in the steel sector by around 45 million tons in 2016, with a similar reduction expected this year, according to Robin Griffin of consultancy Wood Mackenzie.

Chinese mills are also buying more high-quality, iron-rich ore than before in a bid to make production more efficient. "While there remains a glut of low-quality Chinese ore, demand is focused now on premium Australian ore," according to Naomi Suzuki, senior analyst at Sumitomo Corp. Global Research.

This has raised materials costs for Japanese steelmakers, which source much of their ore from Australia. Contract prices for the April-June quarter top $80 -- an increase of 40% from the previous quarter. Steelmakers have announced increases to product prices on the order of 20,000 yen ($176) per ton to stay profitable. Nippon Steel & Sumitomo Metal will likely keep hiking prices in April and beyond, according to Executive Vice President Toshiharu Sakae.

Steel prices are also rising in the broader Asian market due to higher materials prices coupled with high hopes for economic stimulus in China and for an infrastructure investment push by the Donald Trump administration in the U.S.

But there is no guarantee these levels will hold. Coking coal, another material used in steel production, now fetches around $150 per ton after such factors as production cutbacks in China sent the price above $300 in November. Meanwhile, heavy retail investment in China's steel and iron ore futures market is pushing prices above natural levels. If the allure of high steel prices encourages inefficient Chinese mills to bolster output, oversupply could make a return, some fear.

(Nikkei)

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Get Unlimited access

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world
.

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends June 30th

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to the Nikkei Asian Review has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media