(Bloomberg) – Iron ore futures advanced to $ 100 a tonne in Singapore, buoyed by a record monthly rally, amid supply problems in Brazil and sustained and strong demand from China, the top steel producer.
The most active futures gained 22% in May, as Brazil, the second largest exporter in the world, registered an increase in coronavirus infections, fueling fears that the pandemic could curb local supply. Last month, mining company Vale SA lowered its estimate of annual shipments due to bad weather and the impact of the virus on operations. Meanwhile, stocks of iron ore in China have continued to decline.
This basic material for industry has thrived in 2020 despite the coronavirus pandemic hitting industrial activity in many economies. However, Bloomberg Intelligence has warned, along with other experts, that the market could return to a surplus in the second half. In addition to Vale, higher prices will drive the performance of BHP Group, Rio Tinto Group and Fortescue Metals Group Ltd.
The prompt resumption of industrial operations in China has fueled a recovery in derivatives activity and mills continue to increase production, according to analysts at China International Capital Corp., including Ma Kai, in a comment. “Iron ore will fundamentally maintain a tight balance this year,” and supply will gradually recover from the third quarter, they said.
Prices rose 5.7% to $ 98.24 in Singapore, and were trading at $ 98.16 at 3:16 pm local time, heading for the highest close since August. On the Dalián Commodity Exchange, futures soared 23%.
Credit Suisse Group AG recently estimated that the market is now at “maximum adjustment”, a condition that is likely to persist until July. Bloomberg Intelligence expects a surplus of 34 million tons in the second half due to higher supply and stagnant demand, overcoming a deficit of 25 million tons in the first half.
Original Note: Iron Ore Futures Power Toward $ 100 a Ton on Record Monthly Rally
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