Iron ore’s stunning surge won’t fade anytime soon because buyers remain nervous about being caught short as global demand accelerates amid lingering supply threats, according to a veteran commodities trader.
The steelmaking material forged new all-time highs this week, soaring past $220 a ton amid a broadening commodities boom. While steel demand and production are strengthening, many analysts argue market fundamentals alone don’t justify such high prices. That won’t halt further gains, according to Andrew Glass, Singapore-based founder of Avatar Commodities Ltd.
“Logic dictates that these are ridiculous prices but fear will continue to keep the scramble going,” said Glass, a former head of ferrous trading at mining major Anglo American Plc, who has traded commodities since the 1990s. “There is fear of not being able to secure the logistics and the resources you need -- $220 is expensive, but it’s much more expensive if you have to shut down a mill because you can’t get material.”
Industrial commodities and shipping costs are spiking as buyers hurry to secure raw materials with global industries from manufacturing to construction gearing up again as the pandemic fades. That adds to strong demand from China, where elevated steel margins are providing support for high iron ore prices. They could test $250 in the coming 12-18 months, according to Oversea-Chinese Banking Corp.
Chinese iron ore futures jumped the daily limit on Monday morning and other benchmarks hit records. The nation’s steelmakers are ramping up production in defiance of government attempts to rein in output to control the industry’s carbon emissions, while robust profit margins are enabling mills to better accommodate surging input costs.
