• Iron ore is setting new price records after exceeding its 2011 high of $US188 per tonne
• ‘The reality is that steel mill margins are still running incredibly hot, and they are not going to stop producing steel’
• Supply side of the iron ore market caught offside by the run-up in prices and demand

2021 is turning out to be a landmark year for the iron ore market with spot prices this week surpassing their February 2011 high of $US188 per tonne and they could soon reach $US200 per tonne.

At one stage mid-week iron ore spot prices almost hit $US190 per tonne ($245.20/tonne) before slipping back to $US188 per tonne, which is still a new record in Australian currency terms.

“It is worth noting that spot iron ore prices on Wednesday were at the highest level on record in Australian dollar terms,” analysts at Commonwealth Bank of Australia said in a note.

“We continue to believe that iron ore prices will stay elevated as long as steel mill margins in China remain high,” they added.

Chinese steel plants are currently receiving around $US780 per tonne for their reinforcing bar product which is used in construction projects for everything from bridges and buildings to infrastructure.

This price represents a 12-year high and low inventory levels in China are adding to upward pressure on prices for steel products including rebar and hot rolled coil.

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