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Iron ore and coal prices continue to be affected by China’s markets

Coal bituminous

Coal producers such as China and Indonesia are in various stages of new taxes, regulations and licensing

China’s demand for iron ore remained slow this past week, causing a drop in iron ore prices to 89.01 USD/ton, a low point for the year. At the same time, iron ore production has increased, hitting record levels. The lower prices precipitated an increase in imports, as importers were quick to take advantage. However, due to low producer demand, iron ore is sitting in inventory, driving up inventory levels to 109.3M tons in just the last week. A further drop in iron ore prices is expected, good news for Chinese importers who will continue saving money.

The coal market has a few variables impacting its performance. Coal producers such as China and Indonesia are in various stages of new taxes, regulations and licensing – all of which is affecting coal prices. In China, the concern has been to curb pollution, resulting in the planning of a 3% tax on imported coal containing high levels of ash. Policymakers hope the tax will strengthen domestic production of coal, as well as clean up the environment. Since May of this year, coal prices have declined by 5 USD/ton, so the tax increase on imported coal has yet to have its desired effect. Meanwhile, in Indonesia, policymakers approved new regulations for coal export licenses, but have decided temporarily to delay implementation. The coal industry asked for additional time due to the complexity of the new regulations and lack of clear understanding how to properly file license applications.

US dry bulk market also performing well

America’s wheat exports are holding steady, at approximately 460,000 tons per week from the beginning of July. Analysts anticipate an increase in the third quarter of this year, perhaps to a level of 800,000 tons. Soybean exports also are doing very well, with a doubling to 202,103 tons in the last week. In spite of stiff competition from other large exporters, industry analysts expect US exports to continue their climb and to finish into the 4th quarter exporting as much as 1.2M tons per week.