Iron ore executives have generally come out against US president Trump’s steel tariffs. If tariffs drive up scrap prices however, this could support iron ore prices and the miners profits, Kallanish notes.

Rio Tinto chief executive Chris Salisbury said the mining company relies on the free flow of trade around the world. "We don't get a choice in where the resources are and we need to get those resources to our customers, so anything that impedes that obviously does concern us." He added however that its major Asian customers did not have a very large exposure to the US market. For all the major iron ore miners China is the dominant customer, with other Asian consumers such as Japan and Korea also very significant.

BHP Billiton chief executive Andrew Mackenzie meanwhile said that the US tariffs constitute “... a black day for the world and business.” Mackenzie also noted that miners are dependent on trade as their materials are not in the same country as their consumers.

The one supportive voice for 232 from the iron ore sector has come from US-headquartered Cleveland Cliffs. ”We applaud and thank President Trump for taking real action under Section 232 to punish the perpetrators and enablers of unfairly traded steel. The 25% tariffs to be imposed... will support our ability to continue to produce iron ore pellets and steel in our country, enhancing a vibrant manufacturing economy and our national security,” ceo Laurenco Goncalves said. 

The major iron ore miners may be among the winners of Trump’s tariffs however, despite operating and having headquarters outside the country. US import tariffs on steel are expected to support domestic prices there, and that is already supporting higher scrap prices. US West Coast scrap exporters are already offering containerised HMS 1&2 80:20 at $370/t cfr. Kallanish’s assessment for the same product hit $360-362/t cfr this week from $345/t the previous week and just $322-325/t in early February. Scrap prices are expected to remain firm.

Iron ore prices have been sliding and are expected to fall further in the coming weeks. On Thursday the Kallanish index for 62% Fe Australian fines hit $72.03/dry metric ton cfr Qingdao, down $6.97/dmt from a peak of $69/dmt on 26 February, and $1.13/dmt from the start of the year. As the major miners are highly profitable even at lower prices, this decline may not be of too much concern. But the relative pricing to scrap is important because it incentivises more blast furnace hot metal production relative to scrap use. A boost in demand for iron ore could help support prices in the $60s as prices sink towards the marginal cost of production. As the slope of the iron ore cost curve is fairly steep at the more expensive end, an improvement in demand could mean a noticeable increase in the marginal cost.