Top-grade iron ore may touch $100 a tonne, thanks to China – report

High-grade iron ore may spike to $100 a tonne as China intensifies a clampdown on pollution by restraining industrial activity, adding further momentum to a trend that’s reshaped the global market in recent years and driven buyers in Asia’s top economy seek out better-quality material, says a Bloomberg report.

After sinking in March, top-quality ore with 65 per cent iron content gained every month, hitting $91 a tonne last week. In contrast, benchmark 62 per cent ore has flat-lined in the $60 a tonne range, and is presently down by 14 per cent.

Short-term spikes to this level are entirely possible in response to Chinese production and policy announcements, as per analysts. In a market characterized by extraordinary quantity – global iron ore shipments top 1.6 billion tonnes a year – the sustained push for quality among buyers stands to benefit top miners Rio Tinto Group and BHP Billiton Ltd. in Australia, as well as Brazil’s Vale SA as it brings on new high-grade deposits.

After imposing unprecedented curbs on mills last winter, China is increasing the pressure by production restrictions and cutting capacity in Tangshan, a key steel-making hub.

Using higher-content ore – and supplies with lower levels of impurities, especially alumina – enables mills to produce more steel while cutting back on pollutants. Policy makers in China are stepping up their environmental push, and this month announced a three-year masterplan to intensify that push.

The rising importance of quality has been flagged by Australia, the top iron ore shipper. Earlier this month, Australia’s Department of Industry, Innovation & Science said while spreads may narrow as steel production ramps up in China, that they won’t snap back to historical levels given the “ongoing government push to improve air quality through increasingly stringent air pollution policies.”

The high-grade premium is driven by margins for Chinese steelmakers and coking coal prices. A few Canadian projects and Brazil’s Vale ramping up its production, more high grade iron ore is expected to flow in the system, it es expected according to analysts.

Shekhar Ghosh is a communications consultant and and former journalist, who has edited and written for publications such as like Business India, Business Standard, Business Today and Outlook.

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