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Could US-China Trade War Fears Dictate Iron Ore Prices?


May. 31 2018, Published 2:34 p.m. ET

Iron ore price volatility continues

Continuing their volatile streak, iron ore prices are now falling after rising in April. Iron ore reached $63.90 per ton on May 28, registering its seventh drop in eight sessions. While prices were supported in April and early May by China’s announcement of a cut in bank reserve requirements, rising inventory concerns eventually pushed them downward.

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US-China trade and iron ore

US-China trade relations are also worth considering, particularly in relation to US duties imposed on steel exports by China. According to Nikkei Asian Review, BHP CEO Andrew Mackenzie feels that “on its own, the tariff is a relatively small intervention, particularly in Asia.” Fortescue Metals (FSUGY) CEO Elizabeth Gaines said that the US ranks 26th among China’s steel exporting destinations, contributing to just 1% of its annual exports. The duties, therefore, are not significant when it comes to seaborne iron ore demand and prices. Market participants also believe that domestic steel demand in China has remained firm, which should support iron ore demand and safeguard the interests of iron ore miners (XME) such as BHP, FSUGY, Rio Tinto (RIO), and Vale (VALE).

Trade war fears and iron ore

While trade war fears have impacted iron ore prices in the short term, in the long term, these effects should not be material. In this series, we’ll look at iron ore’s and miners’ recent price action, as well as other factors that may have impacted iron ore prices. In the next part, we’ll look at Australia’s and Brazil’s iron ore shipments.


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