Hiccups in the prices of coal and iron ore over the past 24 hours have done little to impact the overall boost to confidence underway in the commodities markets.
After peaking at just over US$80 a tonne on Tuesday, November 29, the price of iron ore dropped to around US$75 overnight.
But analysts and speculators are still confident in the sustainability of the price, which some say could rise to as much as US$90 per tonne.
According to Deutsche Bank, the price surge hasn’t triggered more domestic capacity coming online in China, helping to support the price rise despite cutbacks in Chinese steel production.
“Domestic iron ore production remains weak and was down 7% year on year [in October] despite the recent rally in iron ore prices,” DB said, according to The Australian.
“It looks as though the supply side reform has extended to iron ore as well.
“Chinese iron ore imports in October, 80.8 million tonnes, decreased 13% month to month but remained up 9% year-to-date.”
Meanwhile, as coking coal prices have continued to rise, supporting the viability of a sustained iron ore spot price, thermal coal prices have declined over the past fortnight.
After peaking at more than US$110 per tonne midway through November, thermal coal has retreated to roughly US$95 a tonne.
But according to the AFR, Zhao Qingchun, the chief financial officer of one of China’s biggest state-owned coal companies, Yanzhou Coal Mining Group, believes continued reforms in China will underpin coal prices for at least the next 12 months.
Zhao reportedly believes the Chinese Government is “determined to remove outdated capacity,” by shutting down old, inefficient coal mines.