The price of iron ore has reached a new record high today as increasing demand from China clashes with its rising tensions with Australia.
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ASX iron ore producers are in the spotlight today as the commodities price touched another record high overnight.
The iron ore price rose 5% overnight to reach a new record high of US$202.65 a tonne on the S&P Global Platts index today, reported the Australian Financial Review (AFR). It has easily surpassed its previous record of US$193.85 a tonne, set late last month.
As Australia is the largest source of China’s iron ore, the increasing political tensions have meant another boost to the commodities price. Particularly, as China is ramping up its domestic constructions activities and increasing its demand for steel.
New tensions driving iron ore
The surge in the price of iron ore comes as China’s National Development and Reform Commission released a statement yesterday declaring the nation will halt all activities under the China-Australia Strategic Economic Dialogue.
Australia’s Minister for Trade Dan Tehan said while the commission’s decision was disappointing, Australia remains open to dialogue and engagement with China at the Ministerial level.
It is disappointing to hear that the NDRC has made this decision. The Strategic Economic Dialogue, which was last held in 2017, is an important forum for Australia and China to work through issues relevant to our economic partnership.
— Dan Tehan (@DanTehanWannon) May 6, 2021
S&P Global Platt’s head of iron ore pricing Niki Wang was quoted by the AFR as saying:
A few traders told us they see it as a potential risk on the Australia cargoes supply and suspect the paper market will be pushed up on the news…
While the impact on iron ore business shall be limited from what our sources can see for now, the market really seems to be waiting for clarity.
ASX companies to keep an eye on
We’re yet to see any large reaction from ASX-leading iron ore producers to the commodities record high price.
Today, the Fortescue share price is leading the pack with a 1.2% gain. The Rio share price is the next best, showing a 0.6% gain, while BHP is trailing behind with a share price gain of 0.2% today.
For comparison, the S&P/ASX 200 Index (ASX: XJO) is currently up 0.3%.
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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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