Nov 3 – Iron ore appears to have settled into something akin to a comfortable equilibrium, with Chinese stimulus spending keeping demand high, but supply from Australia and Brazil sufficient to maintain a balanced market.

China, which buys about two-thirds of global seaborne supplies, is continuing to import at a robust pace, with Refinitiv data estimating 101.6 million tonnes were offloaded in October.

The Refinitiv vessel-tracking and port data doesn’t align exactly with official customs data, given slight differences in when cargoes are assessed as having been discharged.

The official numbers also include a small volume of iron ore that arrives overland from neighboring countries.

Nonetheless, the likelihood is that China’s iron ore imports remained above the 100 million tonne level for a fifth consecutive month in October, and remain on track to post a record high for the year as a whole.

This is despite the weakness in the first and early in the second quarter, as Beijing locked down much of the country’s economy to combat the spread of the novel coronavirus.

China’s steel industry is likely to produce more than a billion tonnes in 2020, the first time that level will have been breached, as stimulus spending keeps demand high from the infrastructure and construction sectors.

The supply side is also largely back to normal after the coronavirus hit production in number two exporter Brazil, as well as third-ranked South Africa.

Even though top exporter Australia managed to largely contain the pandemic and maintain production, there appeared to be insufficient supply for a few months around the middle of the year, resulting in prices rallying.

However, supply seems to be recovering, with Refinitiv data showing Brazil shipped about 31.5 million tonnes in October.

This was down from September’s 34.2 million and August’s 33.3 million, but still significantly above the levels being shipped in the first quarter, which were closer to an average of about 22 million tonnes a month.

Australia exported about 78 million tonnes in October, up from 74.5 million in September and the highest month since June’s 82.8 million, according to Refinitiv.

PRICE MODERATION

The return of Brazilian supply has seen the spot price of benchmark 62% iron ore, as assessed by commodity price reporting agency Argus, ease back from its year highs, ending on Monday at $119.50 a tonne.

This is down from the peak so far in 2020 of $130.55 a tonne on Sept. 3, but still some 50% higher than the low of $79.60 from March 23, struck at the height of China’s lockdowns.

The question for the market is whether the seeming return of balance between supply and demand is enough to maintain prices at their current levels.

A price above $100 a tonne has in recent years indicated demand running somewhat ahead of supply, or a bullish sentiment in the market.