Oh dear God….

What a time to be an iron ore miner. Not a substance, perhaps, that gets the pulse racing, but as the key ingredient in steel, and therefore a primary material for the building industry, it’s one that can tell us much about the health of the global economy, and of the miners that supply it.

Iron ore futures hit a two-year high today on the back of a rally in steel prices, amid reports that Chinese ports hold less of the material than previously thought. In the last eight months, the metal has turned from a six-year low of $38 a tonne to around $60. While it’s not quite party time for the iron ore majors – five years ago, the metal was changing hands for $180 a tonne – it’s a far better situation than any of them expected to be in last December.

The ore is not the metal, the metal is not the ore.

It is the iron ore price which is $38 or $60, not the metal price.

Seriously folks, try to just get the very basics right…..

18 thoughts on “Oh dear God….”

  1. So the present $60 price applies to the ore, not the metal as the article states. What about the $180 price of five years ago? Does that apply to the metal as in the article or to the ore?

  2. Presumably one tracks the other, in the same way that refined petroleum products track the price of crude oil?

  3. To some extent, yes. The iron ore price will be an influence upon the price of iron (or steel) but not the single determinant.

  4. Presumably one tracks the other, in the same way that refined petroleum products track the price of crude oil?

    They don’t really…refined products are flogged at market price, with some fluctuation due to the oil price. But as the oil price collapsed, the majors coined it in from their refined products and chemicals as the margins suddenly shot up. In fact, most integrated oil companies are now being kept afloat by their downstream business, which they were all keen to sell a few years back.

  5. Rebar is pretty much the lowest grade of steel (pig iron is lower grade but is iron of course). Absolutely a commodity product and thus very closely linked to iron ore price. Higher grade, hot and cold rolled and so on, will have a more tenuous link to the ore price.

  6. So rebar has a lower value-add over the ore, so the ore price is a larger proportion of the point of sale price >> dependency and fluctuation.

    High-grade steel has a much higher value-add, so the ore price drops as a percentage of the final price >> less dependency and less fluctuation.

  7. Wait, I thought most of the current steel in use are from existing sourced and not smelted from ore?

  8. Depends where you are. Majority in US is from scrap, yes, but not all. Much less from scrap in China

  9. >High-grade steel has a much higher value-add, so the
    > ore price drops as a percentage of the
    >final price >>less dependency and less fluctuation.

    Thow a little manganese (as well as ore) into the regression equation and youll have a pretty good fit for a proxy for non scrap blast furnace steel

  10. Don’t be too hard on them, this sort of thing is endemic. The Australian Greens are simultaneously against all coal extraction but in favour of protecting local jobs in the form of subsidies and preferential supplier status for a broke steel producer in Whyalla.

    I’m not certain if anyone from the company has told them that they might need a bit of coking coal to keep their blast furnaces going.

  11. Just to introduce a slightly different perspective, my scant memory of the periodic table has iron among the metals. If the element is described as a metal, surely it follows that the ore of the element might be described likewise? Not that I think that’s in the journo’s mind, who’d probably think Periodic was a range from IKEA.

  12. Bloke in Costa Rica

    No, because then chalk would be a metal, because it’s made out of calcium (and oxygen/carbon). Metals don’t have to be elemental (viz. steel) but they do have to be composed primarily of metallic elements. Unless you’re an astrophysicist, that is, in which case a metal is anything that isn’t hydrogen or helium.

  13. BiCR, If you were talking of calcium ore then it might actually be useful to describe it as metal, and thus educate the ignorant; it worked for me (I did say my memory of the periodic table was scant!) The difference I’d note with chalk is that it’s a compound in which no single element is important to the exclusion of the others; an ore is stuff we want, mixed with other stuff of less desirability.

    No doubt there are examples of the use of ‘ore’ that contradict this, but that’s categorisation for convenience for you.

  14. Bloke in Costa Rica

    But Nemo, calcium carbonate (in the form of limestone) is an ore of calcium. It’s one source of the bare metal (the main one is dolomite, magnesium calcium carbonate, which is also, nota bene, an ore of magnesium). Another method is electrolysis, from calcium chloride, which is a salt.

Leave a Reply

Your email address will not be published. Required fields are marked *