Trade War and Iron Ore markets

The long term impact of Donald Trump’s steel import tariff of 25%, effective from March 2018, remains to be seen for the US domestic economy, however the potential for a wider trade war with China is shortly to come to a hilt. Trump is expected to announce import tariffs today on Chinese consumer and tech products, with China poised to retaliate against the US agricultural sector worth $14 billion annually. But what of the iron ore market globally? Steel products are the single biggest category of US dry bulk imports with an annual total of 34.5/mt in 2017. In the meantime Chinas iron ore stockpiles rose to 158.6mt with the bulk of stores remaining in the northerly ports of Bohai bay. Despite these figures the Chinese are still demanding higher grade Australian and Brazilian ores. Today the market is $71/mt for 62% FE grade. 


The Capesize spot market has traded around $6.00/ mt for C5 Australia-China route following a weaker Brazil-China C3 route. This has also been reflected in
the short term period market for 180,000 DWT type vessels where charterers by the likes of NYK, Oldendorff and Swissmarine have take vessels for around $16-17,000/pdpr. C5 has been impacted due to a surplus of vessels ballasting toward Australia after delays and weaker rates from Brazil attributed but not limited to Anglo American’s halting of ore production at the Minas Gerais mine following terminal breakdowns and water links. Looking ahead beyond 2020 Roy Hill boss Barry Fitzgerald has been quoted by Bloomberg at the Global Iron Ore & Steel Forecast Conference as highlighting the potential for growth in Eastern Europe, Eurasia and East Africa, largely on account of China’s ‘One Belt One Road’ policy. Such infrastructure demands require continued high import of iron ore. “Our current analysis on the initiative suggests it will drive steel demand in more than 68 countries, bringing $US1.3 trillion ($1.6 trillion) in infrastructure investment into regions along the (Eurasian trade) route,” he said.

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