Iron ore prices have continued to rise,approaching all-time records.
Most get caught out underestimating demand,particularly from China,and almost all have been blindsided by the extent of the supply disruptions from Brazil,the only country other than Australia that produces mass quantities of iron ore for China’s thirsty steel mills.
March quarter production numbers from Brazil’s Vale were down near 20 per cent quarter-on-quarter,an outcome which was responsible for the additional spike in the iron ore price over the past few days.
While there is an expectation that Brazilian supply will continue to recover over time from its dam collapse in 2019,the restoration of production levels has been hampered by the country’s COVID-19 outbreaks and various weather events. And Vale is renowned for undershooting on its optimistic production targets.
Meanwhile,fears that China’s steel production would ease have also proven to be premature. Even at current iron ore prices,steel mill margins are said to be very healthy.
And the Chinese environmental restrictions that were curtailing production don’t appear to be moving the dial. Crude steel production in March jumped almost 20 per cent from March last year.
There are outliers among forecasters,with one of them this week predicting iron ore reaching $US200 a tonne.