MettaInsights: Iron Ore

Sep 24, 2021

What is Iron Ore?

Iron ore is a mineral substance that, when heated in the presence of a reductant, will yield metallic iron (Fe). It almost always consists of iron oxides, the primary forms of which are magnetite (Fe3O4) and hematite (Fe2O3). (1)

What is Iron Ore Used For?

Iron ore is the source of primary iron for the world’s iron and steel industries. It is essential for the production of steel, which in turn is essential to maintain a strong industrial base. Almost all (98%) iron ore is used in steelmaking.

Iron ore is mined in about 50 countries. The seven largest of these producing countries account for about three-quarters of total world production. Australia and Brazil together dominate the world’s iron ore exports, each having about one-third of total exports. (1)

Price Performance in 2021

Iron ore prices soared in 2021 hitting a record high of $230 in May, mainly fueled by increased demand from the construction sector and reduced output from producers as an effect of the Covid-19 lockdowns.

Despite that, the period after July this year saw the price of iron ore tumble as China, the biggest producer and consumer of steel products, announced crude-steel production restrictions this year as it aims to reduce carbon emissions. (2)

According to MarketWatch, steel demand also weakened on the back of hot weather and rainfall in China, as well as the rise in Covid-19 cases (the delta variant). China also changed export taxes in May and July, “reducing incentives to produce for international markets”.

Furthermore, according to Bloomberg, concerns about power shortages also weighed heavy on any positive price movement. (3)

Finally, the recent Evergrande debacle caused further destabilization of the Chinese, and now Hong Kong’s property sectors, leading to a further slump. At the time of writing, the price of iron ore is $90/ton or a decrease of more than 60% from its all-time-high level in May.

Forecast

Citing UBS and Liberium Capital Ltd, Bloomberg expects the price of iron ore next year to be between $89 and $93 with the biggest risk for Chinese steel mills being uncertainty. (3)

Having in mind that the cost for the biggest miner – Rio Tinto Group – is around $18/ton, miners remain profitable.

The Mettalex DEX

We are considering listing an iron ore market on the Mettalex decentralized exchange by the end of 2021. 

Let us know if you would like to short or long iron ore with stablecoins in this Twitter poll.

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References:

  1. USGS. Iron Ore Statistics and Information. National Minerals Information Center. Website. URL.
  2. Saefong, Myra P. Why iron-ore prices are on track to suffer their largest monthly loss on record. Commodities Corner. Published: Aug. 19, 2021 at 1:39 p.m. ET. MarketWatch Website. URL.
  3. Chia, Krystal. Iron Ore Woes Endure as Chinese Steel Demand Faces ‘Last Hurrah’. Markets. Published: September 21, 2021, 2:30 PM GMT+3. Bloomberg Digital Edition. URL.