Jeton Sadiku Discusses Iron Ore and the Impact of COVID-19

Amid a worldwide pandemic that has changed much about what the world expects in healthcare, commerce, and social interaction, critical import/export markets are also struggling to stabilize. Iron ore, one of the modern world’s most popular imports, feeds the steel market.

The steel market makes other industries possible, namely construction, shipping, and transportation. Not far behind crude oil, iron ore is perhaps one of the world’s most essential – if not understated – import/export resources. A major shift in demand can have an enormous impact on the global economy just as a shift in supply would.

As such, the iron ore market remains a key economic indicator. The global pandemic influences iron ore production and trade, and by extension, the worldwide economy.

Jeton Sadiku is an iron ore and international trade expert from London, England. He explains how COVID-19 is affecting this market specifically.

How Does the Iron Ore Market Work?

Iron ore is the most important ingredient in the production of steel. For the nation that relies on construction and manufacturing, steel is an essential commodity for sustaining its GDP, infrastructural growth, and export efforts, says Jeton Sadiku.

Currently, Australia and Brazil lead the world in iron ore extraction and processing. Many other countries, including the United States, contribute to the iron ore supply.

Generally, a desirable resource and security investment for much of the 20th Century, iron ore surged in demand throughout China’s growth into the 21st Century. Not only did iron ore producers enjoy robust revenues, but the overwhelming demand also forced iron ore production to quadruple within just a few years’ time. However, such high demand rarely lasts forever. Once China’s iron ore demand normalized, global production shifted once again.

The Effect of COVID-19 on Imports and Exports

Air travel has exponentially decreased since the outbreak of COVID-19 among first world countries. This factor has delayed negotiations, sales, construction projects, and even critical policy-making initiatives.

For fear of COVID-19 spreading, Jeton Sadiku notes that mining, shipping, and off-loading efforts are also reduced. For any raw resource extraction and refining, these industries remain in flux while consumers adjust to the new norm.

That said, importers and exporters are already making headway in adjusting process and procedures. As many governments anticipate the pandemic to last longer than expected, key players are able to invest in more sustainable practices that will outlast the current mass tragedy.

Jeton Sadiku Explains How COVID-19 has Affected the Iron Ore Industry

After a steep rise in iron ore prices in 2019 (prices increased from 73£ per ton to 90£ between 2018 and last year), market value dropped moderately in the first quarter of 2020 to 70£ per ton. While most economists agree, as does Jeton Sadiku, that the novel coronavirus influenced iron ore pricing, others insist that market adjustments also play a part in current prices.

Still, 70£ is not disastrous. In fact, many describe the moderate drop as nothing short of resilient. China’s economy is already recovering, as is the demand for steel. According to Mining [Dot] Com, in Q120, steel production in China averaged 3.6% y-o-y, compared with 7.7% in 2019 and we expect growth to pick up pace by H220 and average 5.0% y-o-y in 2020. Europe steel demand will be weak in Q220 and could drag iron ore demand lower as well should companies declare force majeure.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes