Iron Ore Market in Brief: prices move back to above USD 90 per MT
On Monday September 2, physical iron ore prices had a surge on the news of Chinese mills likely to face ‘looser’ production restrictions in the September-October period.
Commodity | Price | Difference / MT |
MB 62% FE IRON ORE FINES INDEX | USD 90.58 per ton CFR Qingdao | +5.92 USD |
MB 62% FE PILBARA BLEND FINES INDEX | USD 90.97 per ton CFR Qingdao | +5.93 USD |
MB 62% FE IRON ORE INDEX-LOW ALUMINA | USD 87.32 per ton CFR Qingdao | +4.63 USD |
MB 58% FE PREMIUM INDEX | USD 77.53 per ton CFR Qingdao | +3.69 USD |
MB 65% FE IRON ORE INDEX | USD 97.10 per ton CFR Qingdao | +5.00 USD |
MB 62% FE CHINA PORT PRICE INDEX | 727 Yuan per wet metric ton | +26 Yuan |
KEY DRIVERS
Market participants attributed the rise in seaborne iron ore prices to a string of positive indicators, such as the emergence of restocking demand, upbeat manufacturing data from China and the expectation of looser restrictions on steelmaking operations in the next two months.
Manufacturing activity expanded in China last month, with the Caixin purchasing managers index (PMI) at 50.4, compared with 49.9 in July. A reading above 50 indicates expansion. “The outlook for [the] steel market is positive and on top of all these factors, the availability of Pilbara Blend Fines remains tight and there are many reasons... to explain why the market is moving up,” a trader source from China said.
In addition, a “final draft” document, proposing restrictions for steelmakers in the north China hub of Tangshan over September October surfaced among market participants. The document suggests restrictions will fall mainly on sintering and pelletizing operations rather than affecting blast furnace production. This is largely unchanged from the previous “suggestion draft” circulated around the market earlier this year, sources said.
When compared with restrictions from last year, some market participants have deemed it to be “looser”, which probably prompted the restocking exercise carried out by some steel mills
recently, adding to the bullishness. However, some traders also mentioned that they would “monitor the market closely as short-term restrictions could [still] surface,” as it draws nearer to the country’s week-long celebration to commemorate 70 years of the People’s Republic of China.
China’s iron ore futures also surged on Monday, going up by around 5.97%, while steel futures also showed gains of 2.3-2.8%.
The benchmark January iron ore contract hit its 6% ‘limit-up’ – the exchange’s mandated daily maximum increase - towards the close of the Monday trading session, as did the May contract. Spot iron ore trading activity at the Chinese ports matched the bullishness seen in futures, as prices rose by around 3.8% from last Friday.
QUOTE OF THE DAY
“With the September restrictions seemingly less strict, demand for iron ore is expected to increase, which has lent some support to the rise in prices, but [we] will need to keep an eye out for short-term restrictions as the October National Day holiday approaches,” a trader said.
PORT PRICES
Pilbara Blend fines were traded at around 710-735 Yuan per MT in Tangshan city and Shandong province on Monday, compared with 700-715 Yuan per MT last Friday.
Report By: Encieh Arbabi
