Better Iron Ore Could Reach US $ 100 | Economy | markets

High quality iron ore could reach US $ 100 per metric ton as China intensifies its campaign against pollution by limiting industrial activity, giving a new impetus to a trend that has changed the global market in recent years years and has led buyers of Asia's main economy to seek higher quality materials.

After collapsing in March, high quality ore containing 65% iron won each month, reaching US $ 91 per ton Friday, remaining in positive territory this year despite the increase in trade frictions global, according to Mysteel.com.

Reference material with 62% content remained in the range of US $ 60 and decreased by 14%.

"Short-term peaks at this level are quite possible in response to Chinese policy and production announcements," said Paul Gray, vice-president of iron ore markets at Wood Mackenzie Ltd. 100 USD for the first level ore.

Although WoodMac's view is that high-grade ore does not quote three figures in a sustainable manner, the differences should remain significant.

In a market characterized by extraordinary supply – world iron ore shipments reach 1,600 million tons per year – the sustained boost in quality among buyers benefits the major miners Rio Tinto Group and BHP Billiton Ltd. Australia, as well as the Brazilian Vale SA, because it generates new deposits of high quality.

After imposing unprecedented restrictions on factories last winter, China is increasing pressure, expanding the area that will be affected by production restrictions and cutting capacity in Tangshan, a major production center d & # 39; steel.

"There has been a structural change, which seems to be a preference for the highest grade," said the director of iron ore analysis, Philip Kirchlechner, who said that coal to Coke is expensive. manufacturers also favored the trend.

"Premiums will not be reduced: I believe premiums for high-grade ore will remain at current levels and will not decline."

At WoodMac, Gray expects the differential between the high-grade ore and the reference material to average 26% in winter in China, a little more than the last time. "Our longer-term view is that the margin between 62% and 65% is slightly reduced as Chinese steel margins shrink," he said.

The use of a higher grade ore and lower amounts of impurities, particularly alumina, allows plants to produce more steel and to Reduce the pollution. Policy makers in China are stepping up their environmental campaign and this month they announced a three-year plan to intensify this momentum.

Australia, the main exporter of iron ore, emphasized the increasing importance of quality. Earlier this month, the Ministry of Industry, Innovation and Science said that although deviations can be reduced as steel production increases in China, they will not return to their historical level. from air through increasingly strict pollution policies. "

S & P Global Ratings made a similar observation, but focused on the cheaper end of the market.The penalty for substandard materials containing less than 62% iron and higher impurities" could remain high for for a while, because China's focus on pollution will favor higher grade ore. "