The price of iron ore rose to multi-year highs earlier this week as China pumped hundreds of billions of dollars of fiscal stimulus into its economy to help it recover from the coronavirus pandemic, with a large percentage going into infrastructure. Last month China imported just over 112.50 million metric tons of iron ore, a rise of nearly 25% from a year ago and nearly 11% from a month earlier. The spot price of the benchmark 62% Fe traded just above $128.5 on Tuesday, up 5.4% on the day, the highest level for 6 years.
The price of iron ore has also been supported by ongoing concerns over the supply coming from Brazil, due to it being a major global supplier of the commodity and also a coronavirus hotspot. ‘Continued concerns over Brazil’s iron ore supply, as coronavirus cases and deaths continue to plague the country’s mining regions, have boosted iron ore prices along with strong Chinese demand as steel production has started to heat up with the country’s V-shaped recovery,” Fitch Solutions said in a report last Friday. Fitch Solutions added that it expects prices to remain elevated until 2021 before declining modestly.
Brazil is also one of three countries that face the hardest road to recovery of all the G20 major economies according to a new study, the other two being India and South Africa. Between the three they have 20% of the world’s population and represent more than 10% of global GDP and are projected to see GDP contractions of 7% on average in 2020. Brazil has the second largest Covid-19 caseload in the world, with India the third and South Africa the fifth. According to the Verisk Maplecroft’s Recovery Capacity Index, the three countries have been identified as having weaker institutions and underlying governance that will impede their long-term emergence from the pandemic.
The Verisk Maplecroft’s Recovery Capacity Index measures more than twelve different factors which either undermine or underpin a recovery from a crisis. The East Asian and Western European G-20 nations, which initially suffered the worst hit from the pandemic now have the foundations in place to recover and scored on average 40% higher across the index than their emerging market counterparts. David Wille, an analyst involved with the report said that South Africa, India and Brazil each score as ‘high’ risk for corruption in the dataset, adding, ‘Corrupt, ineffective and unstable governments will be limited in their ability to direct funding to where it is most needed, failing to revive the economy even after the immediate crisis is dealt with’.