FOCUS: HRC vs iron ore - who is leading whom?

Steel market participants often identify iron ore as the key driver of steel prices because mills typically formulate their pricing strategies based on raw material costs - but this appears to have changed in 2020.

While some unique challenges have emerged this year due to the Covid-19 pandemic, one development that stood out from the rest is this: Iron ore market participants have attributed the sharp price increases in the steelmaking raw material to the downstream steel market instead, in particular that for hot-rolled coil, the darling steel commodity that has outshone other products.
Who leads who?
The correlation between Chinese HRC prices and those for imported iron ore has strengthened significantly so far this year in comparison with the last two years.

In the third quarter of 2020, this correlation intensified in September after weakening in August.
An indication closer to one or minus one suggests a stronger correlation while those closer to zero suggest a weaker correlation.

Fastmarkets' daily price assessment of steel hot-rolled coil domestic, ex-whs Eastern China was 3,820-3,840 yuan ($561-564) per tonne on Monday September 28 after falling from a 22-month...

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