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Analysis: Iron ore increasingly divorced from steel

  • Spanish Market: Metals
  • 22/02/24

Some ferrous market participants have long called to scrap "new iron ore" because of its increasing usage in lower carbon intensity steelmaking and potential threat to iron ore in the future.

But Turkish scrap is currently much more highly correlated with Chinese hot-rolled coil compared to Chinese iron ore, despite the latter being the primary input for the world's largest steel consuming and producing region. Just 9.5pc of Chinese steel is produced via electric arc furnace, according to Worldsteel trade association data.

Since the start of 2023 the straight correlation between Chinese iron ore import prices and HRC export prices has been a meagre 25pc, implying little relationship. Even lagged for the lead time from purchasing the raw material to consumption, the correlation is still below 45pc.

That lower correlation encourages direct hedging of fob China HRC as opposed to hedging steel via raw materials: the LME's fob China HRC contract saw volumes jump over 89pc in January compared to the October-December 2023 monthly average volume.

The straight correlation between Turkish scrap imports and Chinese HRC exports over the same period is 80pc, much higher than for iron ore.

There are a number of reasons for the tighter relationship between scrap and HRC. China imports made up more than a third of Turkish HRC imports in 2023, selling over 1.6mn t into the country, up sharply from just over 562,000t the previous year.

Last year 8.4pc of all China's HRC exports went to Turkey, with only Vietnam taking more. China was aggressive in terms of HRC exports last year. Overall it sold almost 24mn t of HRC into overseas markets, even higher than 2015, when its total steel exports surpassed 112mn t and the price of steel anywhere in the world was effectively the Chinese price plus freight. This aggressiveness affected all markets, including Europe, where Asian sellers gained significant import share from their Turkish counterparts.

Turkish mills regularly flex between scrap, semi-finished products and to some extent finished steel, depending on price competitiveness. For example, where the price of scrap is too high, they may opt for slab or, if workable, HRC. Sources suggest Chinese HRC has been purchased in Turkey, and transformed into hot-dip galvanised coil before being sold into the EU.

When entering the scrap market, the price of steel in China, which clearly has a strong influence on the global market, helps Turkish mills gauge value for their purchasing.

At the same time, some suggest iron ore is trading out of line with fundamentals, given its tight supply base — scrap supply is much more fragmented — and the impact of Chinese government policy. Where the government wants to bolster gross domestic product figures, increased industrial production remains a key policy lever given the difficulty of shifting to become a consumer-led economy. Iron ore is also impacted very heavily by macroeconomic news, given how dependent on finances it has become, whereas scrap is more driven by steel supply and demand.

Blast furnace and basic oxygen furnace-based producers in parts of the world have also ramped up their scrap charge to help lower their carbon footprint for certain consumers that want greener products, such as European carmakers. Even some integrated producers in Asia have nearly doubled their charge for this reason, according to supply- and buy-side sources.

Iron ore losing relevance?

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30/08/24

Brazil HRC import prices rise on tariffs

Brazil HRC import prices rise on tariffs

Sao Paulo, 30 August (Argus) — Brazil prices for imported hot rolled coil (HRC) increased this week as tariffs on imported products kicked off and signs out of China's steel sector were mixed. Import prices for Chinese origin HRC into Brazil were heard around $545/metric tonne (t) cfr, sources said, up from the $470-494/t cfr range heard in the previous week. This sharp uptick followed Brazil's decision to increase tariffs on imported products after domestic producers claimed that unfair competition — chiefly from the east Asian nation — was hampering their operations. The new tariffs took effect in June but only started to be felt by consumers in August, sources said. Another reason for the increase in Brazil cited by some sources was a possible price floor reached by Chinese mills in recent weeks. These producers have expressed concerns about their financial health amid a slow economic recovery that precipitated multi-year HRC price lows in China earlier this month. Argus assessed HRC fob Tianjin at $442/t on 19 August, the lowest level since July 2020, when most of the global economy was in the midst of pandemic lockdowns. In the latest assessment, the HRC price rose to $462/t, up by nearly 4.5pc in less than two weeks. China sought outlets for its steel outside of the country, lifting exports of the broad category of steel and iron products by 23pc to 55.2mn t year to date July 2024 from the same period in 2023, according to customs data. At this rate, China's yearly exports in 2024 will be the highest since 2016. Brazil, Chile and Peru have been among the countries widely increasing their imports. It is uncertain whether the price increase will begin to weigh on demand, sources said, as buyers balance greater availability of imported steel against claims that many prefer domestically-sourced HRC. By Carolina Pulice Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Fortescue hold firms on 2024-25 iron ore target


30/08/24
30/08/24

Fortescue hold firms on 2024-25 iron ore target

Beijing, 30 August (Argus) — Australian iron ore producer Fortescue has reiterated its iron ore shipment target for the 2024-25 fiscal year ending 30 June of 190mn-200mn t, including 5mn-9mn t from its Iron Bridge project on a 100pc basis. The Iron Bridge magnetite project in Western Australia shipped its first cargo in July last year, with Fortescue's iron ore shipments totalling 191.6mn t for the full year . It had targeted to ship 192mn-197mn t for 2023-24. The company achieved a hematite average revenue of $103/dry metric tonne (dmt), up by 9pc on a year earlier. Hematite C1 costs for 2023-24 rose by 4pc from the previous year to $18.24/wet metric tonne (wmt) because of higher labour rates and mine plan driven cost escalation, although Fortescue said its cost control measures offset the partial increase. It forecasts hematite C1 costs for 2024-25 to rise to $18.50-19.75/wmt. The Argus ICX seaborne iron ore fines assessment for 62pc Fe cfr Qingdao averaged $119.40/dmt for 2023-24. Fortescue is on track to achieve real zero, or no fossil fuels and no offsets, for its scope 1 and 2 terrestrial emissions across its Australian iron ore operations by 2030. It is aiming to achieve this with building a new solar farm, deployment of electric excavators and the use of battery electric and hydrogen fuel cell haul truck prototypes. Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

US OCTG, line pipe imports fall in July


29/08/24
29/08/24

US OCTG, line pipe imports fall in July

Houston, 29 August (Argus) — Preliminary data from the US Department of Commerce shows that imports of oil country tubular goods (OCTG) and line pipe products fell in July. OCTG volumes fell by 88,100 metric tonnes (t) from the prior year, as volumes from Japan dropped by 15,500t, South Korea and Thailand both dropped by 13,500t, and volumes from Vietnam and Mexico fell by 11,300t and 9,300t, respectively. Volumes of line pipe less than or equal to 16in fell by 12,300t, as Italian volumes dropped by 4,500t, Ukraine dropped to zero from 4,400t in the prior year, and Brazilian volumes fell by 3,100t. Standard pipe imports increased by 13,400t on a 7,900t increase from Turkey. Heavy structural shape volumes jumped by 39,700t as Spanish volumes increased by 21,700t from the prior year, and imports from Germany rose by 9,200t. By Rye Druzchetta US pipe and tube imports metric tonnes Product Jul-24 Jul-23 Volume change ±% Jun-24 OCTG 95,792 183,909 -88,117 -47.9% 126,760 Line pipe 69,387 80,875 -11,488 -14.2% 87,976 Standard 66,100 52,716 13,384 25.4% 76,317 Heavy Structural Shapes 107,979 68,253 39,726 58.2% 54,096 US Department of Commerce July 2024 data is preliminary data, which is subject to change. Line pipe is all diameters. Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Higher flats volumes lead US steel imports up


29/08/24
29/08/24

Higher flats volumes lead US steel imports up

Houston, 29 August (Argus) — Higher volumes of flat steel imports led overall US steel imports higher in July. Total US steel imports for consumption were 2.2mn metric tonnes (t) in July, according to preliminary data from the US Department of Commerce. Hot-rolled coil (HRC) imports rose by 22,600t from the prior year, driven by a 32,900t jump in Japanese volumes, which were offset slightly by a 9,200t drop from Canada. Cold-rolled coil (CRC) volumes were up by 37,000t in July, with Canada exporting 8,800t more than the prior year. Hot-dipped galvanized (HDG) coil imports from Brazil jumped by 17,200t from the prior year, while volumes from Mexico rose by 13,000t. Volumes of blooms, billets and slabs dropped by 121,900t, as Mexico's volumes dropped to zero from 95,800t in the prior year. By Rye Druzchetta US steel imports metric tonnes Product Jul-24 Jul-23 Volume change ±% Jun-24 HRC 156,952 134,326 22,626 16.8% 156,861 CRC 172,746 135,778 36,968 27.2% 113,400 HDG 233,511 165,607 67,904 41.0% 238,809 Blooms, billets, slabs 364,138 486,053 -121,915 -25.1% 395,478 Total (all items)* 2,197,347 2,153,126 44,221 2.1% 1,955,800 US Department of Commerce July 2024 data is preliminary data, which is subject to change. Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

ThyssenKrupp Steel executives leave as tensions rise


29/08/24
29/08/24

ThyssenKrupp Steel executives leave as tensions rise

London, 29 August (Argus) — Seven board and supervisory board members of ThyssenKrupp Steel Europe have left their positions given deepening strife with the chief executive of parent company ThyssenKrupp. There has been an ongoing dispute between ThyssenKrupp chief executive Miguel Lopez and board members of ThyssenKrupp Steel Europe, including the latter's chief executive Bernhard Osburg, for some months now over the future of the business. Osburg and two other board members from Steel Europe have now stepped down, as has the chairman of the Steel Europe supervisory board Sigmar Gabriel and three other supervisory board members. The members have "lost all confidence in the will and ability of the chairman of the executive board of ThyssenKrupp AG to co-operate appropriately", Gabriel said in a note after a meeting today. He said Lopez has carried out an "unprecedented" and public campaign against the executive board of Steel Europe, damaging its ability to act and breaching trust. The Steel Europe board had proposed a plan to align the business' production to its recent shipments, meaning a decline from about 12mn t/yr to 9mn t/yr, and to exit from steelmaker HKM's joint venture with Salzgitter and Vallourec. HKM is viewed as a high-cost slab producer. However, Lopez felt the plans did not go far enough to restructure the business, calling for a deeper reorganisation and reduction in headcount. A spokesperson for union IG Metall said it "strongly" supports Osburg and the outgoing chairman, and criticises the actions of Lopez. The union is not legally allowed to call for strike action, but has called for protests over the departures. One executive said the dispute could threaten the future of Steel Europe as an entity. By Colin Richardson Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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