Prices of Iron Ore Reach Record Levels as Demand Surges

Despite concerns over environmental restrictions in the People’s Republic of China, the price of iron ore kept rising last week. The top steelmaking city in China, Tangshan, stated in March that it would be punishing companies that had discharged pollutants illegally or those that did not implement steps outlined in its emergency anti-pollution plan, which was released after weeks of heavy smog in the northern parts of the country.

Companies in Tangshan’s heavy industry, which include the cement and steel sectors, have been ordered to stop or limit production on heavily polluted days in order to help decrease overall air pollutant emissions, such as nitrogen oxide or sulphuric dioxide, by at least 50%.

According to Fastmarkets MB, Benchmark 63.5% iron content imported into Northern China, Qingdao, was being sold for roughly $178 per ton last week. This is the highest amount recorded in more than a decade. Additionally, the high-quality Brazilian Index 65% iron content also surged to record highs of almost $212 per ton.

Warren Patterson, the head of commodities strategy at ING, a global financial institution, stated in an interview with the Financial Review that despite the restrictions imposed in Tangshan, the steel margins in China were extremely strong in the country, which gave producers the incentive to try and grow their operating rates. Patterson added that the increased focus on decreasing emissions and the attractive margins had been supportive of the demand for higher-quality iron ore. This, he said, can be seen in the quality premium, which has recently expanded.

Lyndon Fagan, an analyst from financial services holding company JPMorgan, noted that other regions in the country would also strengthen considering the surge in steel margins, despite talk of national investigations.

According to market research platform IndexBox, the international consumption of steel is set to grow this year by 4.1% year-on-year. The decrease in mineral supplies from major miners globally is also a factor in the increase in the metal’s prices. However, output from Brazilian Miner Vale, which is the second-largest producer of iron ore, is set to recover before the end of 2021.

In a note, bank analysts from Goldman Sachs note that they expect that the market may soon enter a surplus in the second half of 2021 as Brazilian exports increase. Analysts added that the price of iron ore may also lower to its former $110 per ton by the year’s fourth quarter, before perhaps declining even further to less than $100 dollars next year.

Another mining segment that is likely to see surging demand is uranium as governments look to greener forms of energy. Firms like Uranium Energy Corp. (NYSE American: UEC) are poised to benefit from the extraction and utilization of this resource.

NOTE TO INVESTORS: The latest news and updates relating to Uranium Energy Corp. (NYSE American: UEC) are available in the company’s newsroom at https://ibn.fm/UEC

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