Lhe railroad is not a straight line. Quite the contrary. In recent months, his journey has taken on the appearance of a roller coaster. In May 2021, the iron climbed the curtain. It was trading at more than 230 dollars (203 euros) per ton on the Singapore futures market, flirting with its historic record. Then he let go of the brakes and tumbled below 100 dollars per ton, at the beginning of November, before going back on the gas and starting a recovery. At the start of 2022, it is trading at nearly 130 dollars per ton. Iron is recovering.
To understand this boost, we must turn to Brazil. This country has been in the grip of a violent meteorological episode. Torrential rains fell on the region of Minas Gerais (south-east of the country), rich in ore. The extractions were interrupted, the time to let the bad weather pass. But today, if the mines have more or less resumed their activity, a sword of Damocles remains suspended above the heads of the industrialists, in particular that of the Vale group, one of the most important producers of iron.
Investors’ eyes on China
Even though water flowed under the bridges, everyone remembers the sudden and deadly rupture of a mining dam in Brumadinho, Minas Gerais, on January 25, 2019. The mud tsunami took with it 270 lives. Not to mention the ecological damage. The person responsible for this disaster, the Brazilian mining group Vale, is branded. With the torrent of rains that has just poured in, some are wondering about the solidity of the dams still in place and the risks of supply disruption.
Investors’ eyes are also on China, the world’s biggest consumer of raw materials. “Blue skies for the Games”, this is the wish expressed by the Chinese government, eager to perfect the image of the Olympic event. Despite the vagaries of the coronavirus crisis and diplomatic boycotts, athletes should hit the slopes in two weeks. In an attempt to wipe the windscreen wiper and erase the polluted clouds from the window of the Winter Games, China has encouraged steel mills to limit their production, and therefore their CO2 emissions.2.
This slowdown contributed to the plunge in the price of iron ore, the main component of steel, in the summer of 2021. As did the setbacks of the real estate giant Evergrande, affected by a debt of 260 billion euros . In unstable financial balance, on the verge of bankruptcy, he revealed the weaknesses of the Chinese real estate sector, whose beautiful facade has cracked. However, the Chinese government, under the leadership of Xi Jinping, the man with the iron fist in an iron glove, has given signs of support for the economy and real estate. China’s central bank cut key interest rates to prevent growth from slowing further. The rebound in the metals proves that investors want to believe in it hard as iron…