17-05-2021 West Australian miners boost iron ore shipments in May & Chinese steel/Aluminum production remains hot in April, Braemar ACM Research
Shipments from the iron ore majors in West Australia are on track to hit 76 MMT this May. This marks an 11% improvement on April’s volume and the highest since December last year, though only about 1% higher YoY. Sky-high iron ore prices in excess of $200 per tonne have incentivized these companies to ratchet up shipments. Given that it takes a significant amount of time to drastically increase output, shipments have remained below historical records. The strong volumes have been supportive of elevated Capesize rates but this market is also being driven by a variety of inefficiencies, including the minimum ballast duration requirements for calling at Australian ports.
Steel production in China increased 4.1% MoM in April, hitting a total of 97.9 MMT, the highest monthly total on record. However, prices of finished steel have remained at elevated levels. Front month futures of Rebar and HRC are pricing as high as CNY 5,532/t and CNY 5580/t at time of writing, with HRC around 32% higher since the start of 2021. Part of this increase has been driven by external demand. Chinese steel exports in April were their highest since November 2016, totaling a little over 7.9 MMT, with Supramaxes proving the primary beneficiary of an increase in this trade. The HRC-intensive auto industry has also picked up steam, with auto exports in China totaling 155,000 units in April, 72% higher YoY and the second highest monthly total on record. Initiated floor space of houses newly started also grew by 49% MoM in April to 403 million cumulative square meters, boosting demand for building materials such as rebar.
Aluminum production in China hit a record 3.4 MMT in April, rising just over 1% MoM and 12% YoY. Production in the first four months of the year was almost 8% higher than in 2020. Prices have risen sharply in recent months in a similar fashion to other commodities, with aluminum prices on the Shanghai futures exchange hitting 10-year highs last week at over 20,000 RMB per tonne. The rise in prices, as with steel, has incentivized smelters to ramp up output. Mid-March saw the city of Baotou in Inner Mongolia force several aluminum producers in the region, among other industrial factories, to shut down in order to meet energy consumption targets for Q1 2021. Having entered the second quarter, smelters in the region were able to restart their operations to full capacity.