“China-Australia trade disputes have recently intensified market concerns about the iron ore supply from Australia. Given the strong domestic demand, and the recovery of international steel industry production, overseas prices of iron ore have risen significantly,” an article published by state-run Futures Daily said on Tuesday.

As of Monday, the price of imported iron ore has surged above US$142 per tonne, up more than 55 per cent from the beginning of this year, according to the association. In the first week of December, the price rose about 10 per cent. Last year, China imported more than 1 billion tonnes of iron ore to meet the overall domestic demand of 1.2 billion tonnes.

The soaring cost of imported iron ore also spilled over to the domestic futures market. The price of the main iron ore contract traded on the Dalian Commodity Exchange rose more than 20 per cent in the past month to almost 1,000 yuan (US$153) per tonne. It spooked the exchange to release a risk-warning letter to investors on Friday and imposed more restrictions on futures trading.

At the main ports in Pilbara, the iron ore capital of Australia, total iron ore export shipments from Port Hedland and the Port of Dampier in November were roughly similar to the same time last year, according to the latest data from the Pilbara Ports Authority.

China imported 98 million tones of iron ore last month, up 8.3 per cent from a year earlier, according to data from China customs. The country’s iron ore trade with Australia has remained steady by value and volume this year, based on the latest customs data available up to October.

The price of iron ore has been mainly pushed up by recovering profits for steel making in China and rising demand for steel products from downstream manufacturing and construction sectors, as the Chinese economy recovers from the coronavirus.

Since September, the price of steel products has recovered to the level from earlier in 2019, and production has grown by double digits since July. The iron ore stocked up at Chinese ports has been falling sharply since early November, indicating strong demand for the metal.

There is also a supply problem.

“On the supply side, disappointing forecasts by Brazilian miner Vale, which expects to produce 300 million to 305 million tonnes this year, below a previously lowered target of at least 310 million tonnes, left further room for upside momentum [for the price of iron ore],” said Trading Economics, a financial services company.

The Brazilian miner is also taking strides to push up its supply to China, with increased shipments at China’s deepwater ports and more portside iron ore sales, though this will take time.

“That likely reflects, in part, the acceleration of demand in China versus the rest of the world in the wake of pandemic-related industrial lockdowns. There may also be room for further expansion as trade relations between China and Australia worsen,” Panjiva said in a note on Friday.

Meanwhile, Swiss-based commodity trader Trafigura also reported record annual profits for 2020 on Wednesday, with its annual report pointing to “record high stainless steel consumption in China in the second half of 2020” as the driving force behind its strong metals performance.

Additional reporting by Su-Lin Tan

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