Serious problems begin with the supply of iron ore

The three largest iron ore producers in the world recorded lower production of raw materials in the first quarter of this year compared to the last quarter of 2020. Given the very high volume of steel production in China, the market is showing the first signs that the situation is worsening. Ore prices reached their highest level in a decade.

Steel production in China increased to 94.02 million tonnes in March, the highest since August 2020. At a daily production level of 3.03 million tons, while the average daily production in January and February was about 2.97 million tons.

Ore is getting more and more expensive

So it’s no surprise that spot prices (immediate delivery) of iron ore for delivery to northern China, according to Argus, hit a ten-year high of $ 188.70 on Wednesday. per ton. True, they later fell to $ 185.60, but the situation is quite acute, according to Reuters.

High iron ore prices, as well as high domestic steel prices, prompted China’s Industry Ministry to announce on April 20 that it will take steps to stabilize raw material prices. The Beijing authorities fear that further price increases could lead to large-scale speculation.

It is not known how they want to counteract this, the problem is that the ore will not come. Major suppliers of this key raw material face various challenges.

Giants Trouble

Rio Tinto, currently the world’s largest iron ore producer, reported production of 76.4 million tonnes in the first quarter of this year. This means a decrease of 11 percent. over the previous quarter and up 2 percent. below the level of the same quarter of 2020

Vale’s position was even worse. The Brazilian company’s production in the first quarter was 68.05 million tonnes, down 19.5 percent. compared to the fourth quarter.

BHP Group, the second largest ore exporter during the reporting period, produced 66.7 million tonnes of iron ore, up 5%. less than in the previous quarter, and by 2 percent. less than in the same quarter a year earlier.

The decline in production can be attributed to various reasons. On the one hand, these are random factors, for example, the amount of precipitation in Australia, on the other hand, there were no new high-performance quarries last year and lower investment costs.

Yes, leading producers promise to improve the situation, but without increasing production, the price of iron ore could break new records.

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