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Iron Ore Prices Shrugging Off the Trade War

May 24, 2019

Iron Ore Prices Shrugging Off the Trade War

The U.S./China war on trade has taken a very negative turn recently. Ongoing negotiations have seemingly fallen apart. The U.S. has raised current tariffs on $200 billion of Chinese goods from 10 percent to 25 percent. The Chinese, as expected, have since retaliated, stating they would increase tariffs on $60 billion of U.S. goods starting June 1st.

The escalation of the trade war has sent shockwaves through global financial markets. Some markets have been more affected than others, and some seemingly not at all. Even as concerns over the globe’s first and second-largest economies increases, the iron ore market has continued to move higher.

According to Business insider, iron ore prices have shown little reaction to the trade war escalation that has pressured both Chinese stocks and the yuan. The price of the metal surged recently to its highest level since July 2014. The metal has seen some selling, however, giving back some 1.2 percent to $96.10 per-tonne. The metal’s mixed performance echoed that of many Chinese bulk commodity markets.

Ongoing supply concerns are likely the primary factor keeping the market on solid footing. Last week, the world’s biggest producer of the steel-making ingredient lowered its supply forecast. According to ft.com, Brazil miner Vale said sales of the metal would be towards the lower end of a 307m to 332m tonne range. Vale has been forced to halt mining at several locations after a dam disaster three months ago. These mining outages, combined with weather-related problems at key mining sites in Australia, have given prices a boost. In fact, some analysts now feel the metal is likely to break the $100 per-tonne mark.

In addition to those ongoing supply concerns, fresh sanctions against Iran may also act to boost prices. New sanctions against Iran include its iron ore, copper, steel and aluminum sectors. These sanctions put another 14m tonnes of supply at risk.

The SGX TSI Iron Ore 62% contract has been on the offensive for months now. The metal has been on a sharp ascent since the beginning of the year, at which time prices were trading just over $60 per-tonne. The metal has recently run into some overhead resistance around the $95 level but has thus far not strayed far from this level. With tighter trading ranges and little to no downside recently, the price of iron ore could be gearing up for a sharp and significant leg higher. There appears to be little overhead resistance on the charts after the $95 level, and prices could potentially make a swift move to $125 or higher.

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Singapore Iron Ore Week 6-9 May 2019

The Singapore Iron Ore Week, jointly organized by the Singapore Exchange and Esteel, was successfully held from 6 May to 9 May 2019. The event comprises Singapore Iron Ore Forum, SGX Commodities Awards Night, Gala Dinner, trade exhibition, sports tournaments, education workshops and a series of networking receptions.

As traders from the iron ore and steel industry gathered in Singapore to discuss and share industry trends and market developments, Straits Financial hosted its annual cocktail reception on 8 May 2019 in celebration of the Singapore Iron Ore Week to express our gratitude towards our industry friends for their continuous support.

cocktail reception 2019

This year, Straits Financial was honored to receive sponsorships from Xinhu Futures and Asia Pacific Exchange (APEX). Mr. Roger Quek, Managing Director of Straits Financial gave his opening speech, followed by Mr. Kenneth Wang, Head of Financial Product Business Division of APEX and Mr. Yang Xi Dong, General Manager of Xinhu Futures. At the reception, Straits Financial received the “Inaugural Clearing Award” from APEX in recognition of its achievement in clinching the inaugural trade of the exchange when APEX launched the RBD Palm Olein Futures Contract.

Roger & Apex
Mr. Roger Quek (left) receiving the award from Mr. Kenneth Wang (right).

Xinhu futures speech
Mr. Yang Xi Dong (left), General Manager of Xinhu Futures giving his opening speech.

The reception received overwhelming responses with 200 guests attending the event. Looking forward seeing you next year!

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