RESEARCH: Key takeaways from the latest Steel Raw Materials Market Tracker

The latest forecasts from Fastmarkets’ team of analysts are ready to view.

  • Iron ore prices have shot up as market participants have judged the supply risks from Covid-19 higher at this point in time when there is already a tight seaborne market. Despite the efforts to ramp up, Vale is struggling to catch up with its pre-dam disaster export volumes and its slow recovery has only been hit further by the coronavirus pandemic. Brazilian iron ore exports in the first five months of the year were down 13.2% year on year to 115.3 million tonnes. Exports to almost every market dropped, with China being the only destination that recorded a rise.
  • We expect that the price for high-grade iron ore fines will be most affected as Australian miners could potentially make up for lost Brazilian shipments in the mid- and low-grade segments. However, in the coming months, iron ore prices will face the biggest downside risks if Brazil’s curtailment of the coronavirus spread coincides with a downward shift in iron ore demand from Chinese mills which enter a slower summer season, we anticipate.
  • While Chinese buying has been driving demand and boosting prices, the downside risks from the rest of the world have mounted with Covid-19 restrictions. And this has affected coking coal prices in a negative way, while supporting seaborne iron ore prices at the same time.
  • For example, the US metallurgical coal trade is not dependent on China, the only lively import market currently. Major importers of US-origin coking coal include Brazil, European countries, Ukraine, India, Japan and South Korea. Shipments to China accounted only for 3% of the total met coal exports from the US in the first four months of this year.
  • With demand from India struggling in recent months as the country went into lockdown to contain the spread of the Covid-19 since late March, US sellers have struggled to shift material elsewhere, adding pressure to metallurgical coal prices. Moreover, Brazil, the biggest single buyer of US coking coal, has become a hot spot for the virus, which may have affected its imports of metallurgical coal. In the meantime, Australia is gradually increasing its exports, adding to perceptions of surplus supply conditions in the met coal market.

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