Could Higher Iron Ore Prices Boost ArcelorMittal Stock?



Iron ore prices

Seaborne iron ore prices have been quite volatile this year, beginning on a positive note for iron ore, which peaked at $96 per metric ton in February. However, prices came under pressure after that. Seaborne iron ore prices bottomed out in the mid-$50 range in June. However, prices have since rebounded, and the benchmark iron ore contract is currently hovering around $75 per metric ton.

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China is the single biggest driver of the seaborne iron ore markets. The country accounts for roughly two-thirds of seaborne iron ore demand (CLF) (BHP). Chinese steel markets have shown resilience this year. Chinese steel production has been strong in 2017. The country’s July 2017 steel production hit a fresh monthly record of 74.0 million tons, a yearly rise of 10.3%. July is the 17th consecutive month that China’s steel production has registered a yearly increase.

Iron ore demand

Rising Chinese steel production is supporting the country’s iron ore demand, which has led to higher iron ore imports. Better-than-expected Chinese demand is supporting iron ore prices. Higher iron ore prices are positive for miners such as ArcelorMittal (MT) that have captive mines. U.S. Steel Corporation (X) also has captive iron ore mines in the United States but buys iron ore from third parties in Europe. AK Steel (AKS) sources all of its iron ore needs from third parties.

Higher iron ore prices are also supporting steel prices. However, not many analysts are convinced that iron ore can sustain at current levels.

In the next part, let’s look at the recent trend in coking prices.


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