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viewpoint: Iron Ore
FULL STEAM AHEAD? BY BASIL KARATZAS
The iron ore rally seems to have lost steam for now, but capesize vessel freight rates imply otherwise
A
ny way one sees it, we all still live in a covid-19 world, whether we like it or not. Massive vaccinations notwithstanding and a lift of travel and mask-wearing restrictions in the western world may have given us a sense of normalcy – which is most welcome news after almost two years of lunacy – but the effects of covid-19 are affecting our lives in both visible and tangential ways today. The prevailing logic has been that
once a vaccine for covid-19 was found, the happy days of 2019 would have rolled back, as if flipping a switch. How naïve we all were! Although economic activity may have been recovering nicely since the covid-19 vaccine, recovery of industrial production has not been smooth, as factories have been short both of labour and of raw materials. Shifting spending patterns by consumers have only made imbalances more exacerbated and through the
“bullwhip effect”, supply chains have barely managed to keep up with demand and timely deliveries. Coming out of covid-19, prices for commodities skyrocketed, as factories started revving up production to meet recovering demand and also as they were also trying to replenish inventories of raw materials and commodities at the same time, inventories that were depleted during the pandemic; mining companies, shippers, shipping operations and port terminals were all functioning via mountains of operational hurdles during the shutdowns and the inventory level was not among the highest of priorities.
rallying round
The commodities rally has been one of the strongest in the last decade. For example, the price of copper moved from approximately $2,300 per ton in early 2020 to almost $4,900 per ton in late 2021. The price of coal skyrocked from approximately $50 per ton to more than $300 per ton in the same period. The price of iron ore moved from below $80 per ton to approximately $225 per ton in the same period.
BULK TERMINALS
international | SUMMER 2022
