Iron ore hits six month high, then nosedives as China’s State buyer emerges from slumber

• Iron ore futures nosedive in afternoon session as China’s state iron ore buyer emerges from its slumber
• Coal miners make gains despite energy intervention

Iron ore miners were poised to hoist the ASX materials sector on their hefty shoulders and carry the rest of the market home.

But reports emerged from Bloomberg that China’s next big play to wrest control of iron ore pricing, the China Mineral Resources Group, was set to begin making purchases next year for 20 of its largest steelmakers.

That left a sour note, tanking futures through the afternoon session. Singapore futures, which started the day above US$110/t, were down 3.41% to US$107.70/t by 3.30pm AEDT.

The Dalian exchange’s most-traded May contract roared higher in the morning before taking a sudden turn, falling 1.3% to US$115.60/t.

It is a story that has been bubbling away for most of 2022 after China reacted badly to volatile prices that saw it deliver record export earnings to Australia post-Covid despite being in the grips of a cold trade war.

The common response from the Aussie iron ore miners has been that the market as it is, which has revolved around spot prices linked to major indices since 2010, is working well as is, but that their biggest customer must be respected.

Australia sends over three quarters of its 900Mtpa of iron ore exports to China, producer of almost 60% of the world’s crude steel and buyer of around 70% of the global seaborne iron ore trade.

That means demand for iron ore is largely driven by economic impulses and buying trends form Chinese mills.

But there are far more steel mill owners than there are substantial iron ore producers, with the bulk of supply concentrated in the hands of majors BHP (ASX:BHP), Rio Tinto (ASX:RIO), Fortescue Metals Group (ASX:FMG) and Vale.

It has seen Beijing complain sporadically that the producers have too much pricing power — normally when prices start rising and they don’t like it.

After falling below US$80/t at the end of October, iron ore prices have risen around 40% since in a rapid rebound prompted by the removal of Covid controls in China.

Rio was up 1.32% at 4pm AEDT, but FMG, BHP, Champion Iron (ASX:CIA), Grange Resources (ASX:GRR) and MinRes (ASX:MIN) all slipped into the red.

Iron ore miners share prices today:

Who closed the week on a high?

It’s been a tough one for battery metals stocks, who all fell in afternoon trade, but coal miners closed the week on a high after prices for Newcastle thermal held above US$400/t.

They have been resilient despite moves by Canberra this week to cap domestic coal and gas prices in a bill to intervene in energy market prices.

Whitehaven Coal (ASX:WHC) ended the week up more than 7% over the past five trading days, with similar gains for New Hope (ASX:NHC) and Yancoal (ASX:YAL).

Met coal miners have been less well supported, with Coronado (ASX:CRN) down 2.36% for the week.

Coal monstars share price today:

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