David Hargreaves on Iron Ore

David Hargreaves

Iron Ore: Now China wants pricing changes. When you have a commodity where three countries export 70 %, one country imports 60 % and three companies produce the majority, you are going to have some fun when it comes to pricing.

Add seasonality and you have iron ore. Add the swing factor of India exporting 10% of world demand and the possibility of a pricing consensus is remote. For many years the major parties settled on annual pricing, which became unwieldy. Then they moved to quarterly fixings which sort of worked, but led to a free market which became much more active and a tail threatening to wag the dog. That is where we are now and even the Chinese don’t like. So if the 60 % client is unhappy, you had better listen. Problem is there is nowhere else to go for that volume. This column has long recommended daily fixing á la the LME but the Chinese don’t like that idea either. They say it will lead to speculation. So we have an impasse. On the positive side, this is recognised by all the major parties but no solution in sight. The spot market picked up quite smartly in the past two weeks, but its gyrations of the past 4 to 5 are greater than you might have found on a terminal based system.

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About David Hargreaves

David Hargreaves is a mining engineer with over forty years of senior experience in the industry. After qualifying in coal mining he worked in the iron ore mines of Quebec and Northwest Ontario before diversifying into other bulk minerals including bauxite. He was Head of Research for stockbrokers James Capel in London from 1974 to 1977 and voted Mining Analyst of the year on three successive occasions.

Since forming his own metals broking and research company in 1977, he has successfully promoted and been a director of several public companies. He currently writes “The Week in Mining”, an incisive review of world mining events, for stockbrokers WH Ireland. David’s research pays particular attention to steel via the iron ore and coal supply industries. He is a Chartered Mining Engineer, Fellow of the Geological Society and the Institute of Mining, Minerals and Materials, and a Member of the Royal Institution. His textbook, “The World Index of Resources and Population” accurately predicted the exponential rise in demand for steel industry products.