Yearend – Brazil, Australia iron ore shipments set record; China spearheads other commodities

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The total volume of iron ore dispatched to global destinations from Australia and Brazil was 29.7 million tonnes in December, the highest since June 2019, according to a survey from Mysteel.

Iron ore shipments from ten Australian ports bound for global destinations hit 21.7 million tonnes, and the tonnage shipped from Brazil’s nine ports to reach 8 million tonnes. Iron ore outperformed all commodities in 2020, more than doubling to record highs on strong Chinese steel demand.

As the world’s largest producer of steel at 1.1 billion tonnes in 2020, China imports 60% of its iron ore from Australia. Bilateral relations between the two countries soured earlier this year after Australia supported a growing call for an international inquiry into China’s handling of the coronavirus pandemic. The ongoing tensions have not had a big impact on the iron ore trade so far.

Australia’s government said it foresees China’s pull on Australian iron ore exports remaining strong in the next few years. “Mining exports are expected to fall by 0.5% in 2020-2021 and grow by 5% in 2021-2022,” it said in its mid-year economic report.

Iron ore

Prices for iron ore have more than doubled in 2020, putting the steelmaking raw material on track to be the top-performing major commodity globally for a second straight year as speculative money floods in and Chinese demand holds firm.

Iron ore and steel outperformed in 2020 thanks to booming Chinese construction and manufacturing demand, but base metals are set to lead all metals in 2021 as vaccine rollouts spur a global economic recovery. A China-led economic recovery should boost demand for the following commodities in 2021 after covid-19 roiled global markets in 2020.

Copper

Copper should rise the most because of its widespread applications in construction, appliances and power grids, while aluminium should also gain. Ferrous is more reliant on China’s economy via infrastructure construction. A broad-based recovery in the global economy next year should benefit base metals. Copper demand is likely to go up.

Crude oil

Oil prices turned negative for the first time ever in April as demand seized up during the global coronavirus lockdowns but have recovered since, though not back to pre-covid levels, amid hope that vaccines will restore consumption.

“However, there are some hurdles before the oil market can assume the worst is over,” said an ANZ Research report. “Many governments are currently increasing restrictions to halt a resurgent spread while vaccine mass-production and distribution is worked out.”

Gold

Traditional safe-haven gold scaled record highs this year as investors sought refuge from a weakening dollar and a global barrage of government spending that threatened rising inflation.

Prices have eased as vaccine hopes spurred investors to redeploy capital, but bullion’s outlook remains upbeat in 2021. While rising risk sentiment may prove to be an early headwind for gold’s allure as a safe haven asset, the triple combination of a weak dollar, low yields and rising inflation expectations should continue to drive gold higher. 

Soymeal

Soymeal has been tapped as 2021’s top agricultural commodity, with demand expecting to be super-charged by a rapidly recovering hog herd after the devastation caused by African swine fever in 2018 and 2019. China’s hog (pigs) sector continues to grow and recover. Live hog prices are still relatively high which means new breeding operations will be developed.

Soybean imports into China has already been a record in 2020. The shift towards large-scale farms as China rebuilds its hog sector will mean increased soymeal demand.

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