IRON ORE, one of the world’s hottest commodities, is fizzling out.
The key ingredient in steelmaking fell to below $130 (R1 845) a ton in the second week of September.
Global economics website tradingeconomics.com said iron ore was below the $230 a ton level recorded in May.
China wants to put the brakes on steel production to meet its targets of reducing greenhouse gas emissions.
“The Chinese city of Handan became the latest region to implement restrictions on steel output after the provinces of Anhui, Gansu, Fujian, Jiangsu, Jiangxi, Shandong, and Yunnan were told to limit their production to 2020 volumes amid China’s efforts to curb carbon emissions,” said tradingeconomics.com.
China imported iron ore worth a record $20 billion (abpit R284bn) in August, as purchases from Brazil grew and from Australia hit a record high.
Iron ore prices reached a seven-year high at the end of December 2020, largely driven by China’s rapid economic recovery and subsequently by the reopening of other global steel markets. However, China’s steel curtailments have put pressure on prices.
The slump came as August saw a commodity price bloodbath.
Alexander Forbes Investments said in its monthly economic note on Friday that commodity prices had slipped in August amid continued agony over demand as the rapid spread of the delta variant resulted in some countries reintroducing lockdown to curb the spread of the virus.
“Furthermore, commodities prices were also impacted by signs of a slowdown in the US and China, with the purchasing managers indexes decreasing from their high,” said the note. Brent crude oil decreased by 4.4 percent in August, falling below $70 a barrel on demand concerns.
Gold was flat in the month on global growth concerns.
“Commodity prices remain well supported over the medium term, driven by infrastructure spending and a further reopening of the global economy, but the peak performance seems to be behind us,” Alexander Forbes Investments said.
Old Mutual Wealth Investment Strategists economist Izak Odendaal said among industrial metals, iron ore fell 18 percent in August and was now down a third from its recent elevated peak, and copper was also 1 percent lower in the month.
Odendaal said South Africa was a major coal exporter, the higher price offsets the declines in iron ore and platinum group metals to an extent.
He also said while South Africa’s overall commodity export price had come off its recent peak, it was still elevated compared to where it was on the eve of the pandemic.
“This should continue to support a strong export performance.”
July’s trade numbers were negatively impacted by the unrest and the cyber attack that forced major ports to turn to manual processing.
“But the R36bn surplus was still robust by any standard, and the R290bn surplus for the first seven months of 2021 is three times larger than it was for the corresponding period in 2020,” he said.