CISA calls for increased production of domestic iron ore
China iron and steel Association continue to focus on supply issues for the world’s second largest economy as it emerges from a forced lockdown that continues to blight countries around the world. Over a year after the Brazilian dam disaster which killed over 200 people; iron ore futures are back above USD 90.00 mt, with talk that it is only a matter of time before the front-end futures trade back over USD 100.00 mt.
Domestic Supply
China’s domestic supply has decreased in recent years due to lower FE content and higher costs, compared to the big four miners from Australia and Brazil. However, with prices remaining buoyant and Vale continuing to remain less productive than previous years the CISA are calling for domestic supply to be above 20% of consumption
The international Supply chain
Not content with calling for an increase in domestic production, the CISA have now gone one further with Bloomberg reporting He Wenbo the Secretary general of the China Iron & Steel Association has urged mills to buy stakes in in overseas mining companies or assets. A world in lockdown is causing volatility and opportunity, for the worlds largest steel producer this is the time to invest in their supply chain and decrease a supply and therefore volatility exposure. Wenbo also suggested boosting steel scrap consumption
The futures
Tight supply from Brazil has benefitted the Western Australian mining community the most, with June futures prices rising by 19.5% to a high of USD 96.59 mt during the month of May. The futures continue to find buying support at lower levels, as mills, worried about the increasing infection cases in Brazil due to the lack an enforced lockdown and a potential further decrease in exports from Brazil