Steel material hit new all-time highs this week, surging above $ 220 a tonne amid a burgeoning commodity boom. While the demand for steel and its production is growing, many analysts argue that market fundamentals alone do not justify such high prices. This will not stop further growth, according to Andrew Glass, founder of Avatar Commodities.
The staggering growth in iron ore production will not stop anytime soon, according to a seasoned commodity trader, as buyers remain nervous about not being supplied with raw materials due to rising global demand amid continuing supply-side threats.
"Logic dictates that these are ludicrous prices, but fear will continue to fight," said Glass, a former head of ferrous metals trading at large mining company Anglo American, which has traded in commodities since the 1990s. "There are fears that it will not be possible to provide the logistics and the necessary resources - $ 220 is expensive, but it is much more expensive if you have to close the plant because you cannot get the material."
Manufactured goods and transportation costs are rising as buyers rush to secure raw materials thanks to global industries, from manufacturing to construction, which are gaining traction again as the pandemic disappears. This boosts demand from China, where increased steel margins support high iron ore prices. According to Oversea-Chinese Banking Corp., they could test $ 250 in the next 12-18 months.
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