[ferro-alloys.com]

  As tensions between China and Australia intensify, Australian iron ore has been delayed, indicating that China's steel industry still has strong demand for it. Australia media pointed out that China aims to achieve carbon neutralization in 2060 and strictly limit the steel production environment, but it is unlikely to indicate the end of the soaring iron ore price. Instead, the beginning of prosperity will benefit Australian miners who produce higher quality.

  Spot iron ore prices fell 2.7 percent earlier this week to a six week low of $157.01 a ton, with investors cautious about the outlook, according to data. Last week, policymakers at Tangshan, China's steel hub, announced plans to limit production by several steel suppliers until the end of this year to reduce emissions. Although the impact of the decision was initially price falls, several experts believe that market conditions will still support producers.

  "It's the beginning of prosperity, not the end," said Ben cleary, global natural resources portfolio manager at Tribeca. China has announced many decarbonization policies that will increase, rather than reduce, the use of steel. China's efforts to increase renewable energy infrastructure will require a lot of steel support and will maintain the same demand for iron ore. "

  "What China has announced is a significant efficiency target, so it will close smaller high-carbon operators and turn to state-owned companies that support large-scale operations," clari continued. This will require more high quality iron ore from Australia. "

  China's increasingly stringent emission restrictions have not convinced all groups that the price of spot iron ore has fallen more than 10 per cent since early March. T. "Quality premium is starting to show again, which really reflects profitability and environmental concerns about steel," said Tom shermerdine, equity analyst at Rowe price. We think prices will rise to $100 a ton in the year and then fall back to $75 a tonne from a long-term perspective. Prices have continued to fall to $38 a ton over the past five years. "

  "As China begins to clean up the steel industry by limiting high carbon steel, this will drive demand for higher quality iron ore," shermerdin added. The change in the premium will mean that Australian iron miners will have better realisation prices. "

  In a report to customers, Vivek DHAR, an analyst with mining and energy commodities at CBA, said China's impact on iron ore prices may not reflect what it thinks is so bad. "A weak steel production in China could support higher steel plant margins, which could eventually push up iron ore prices," he wrote. Given the strict conditions, the market may tend to use high-grade iron ore products that are more likely to reduce emissions. "

  Lachlan Shaw, head of NAB commodity research, also believes that prices will remain supported at least by the first half of this year. "Although prices are higher than inventory levels, steel production is much higher than in 2019, which means that stocks in days of use will be tighter," he said

  "Elsewhere, as demand starts to boost before the June construction peak, China's steel inventory growth is slowing and steel prices are at a high level," he said. Although recent increases in iron ore inventories are a risk, we believe prices will be supported by strong demand (second quarter). "

• [Editor:Catherine Ren]