Iron Ore Market in Brief:
Seaborne iron ore prices stayed flat on Tuesday, October 1 at the start of the week-long Chinese National holiday.
Commodity | Price | Difference / MT |
MB 62% FE IRON ORE FINES INDEX | USD 93.38 per ton CFR Qingdao | unchanged |
MB 62% FE PILBARA BLEND FINES INDEX | USD 92.91 per ton CFR Qingdao | unchanged |
MB 62% FE IRON ORE INDEX-LOW ALUMINA | USD 91.72 per ton CFR Qingdao | unchanged |
MB 58% FE PREMIUM INDEX | USD 82.28 per ton CFR Qingdao | unchanged |
MB 65% FE IRON ORE INDEX | USD 100.40 per ton CFR Qingdao | unchanged |
MB 62% FE CHINA PORT PRICE INDEX | 739 Yuan per wet metric ton | unchanged |
MARKET DRIVERS
Markets in China closed for the National Day holiday from Tuesday, October 1 to Monday, October 7. Meanwhile, the 65% Fe iron ore derivative contract offered by the Singapore Exchange reached a new record high of 2.26 million MT traded over September.
A lack of visible market activity due to the public holiday led to the daily iron ore indices being rolled over, in accordance with published fallback measures. Accordingly, in China, there was no visible activity observed in ports and the Dalian Commodity Exchange was closed for public holidays.
The 65% Fe iron ore derivative contract offered by the Singapore Exchange (SGX) registered record levels of traded volume in September 2019, with the contract seeing participation from a diverse set of stakeholders in the iron ore value chain.
The 62% Fe iron ore market was rangebound at USD90-100 for most of September, with a month-on-month increase of 2.8%; while the 65% Fe market saw a more modest 0.7% rise during the same period. The 65% Fe iron ore derivative contract has garnered plenty of interest from the banks lately, a trader in Singapore said.
In September, the spread between 65% and 62% Fe continued to narrow and reached USD6.60 per MT, with bulk of the supply disruptions this year concentrated in the mid-grade segment. Ample availability of high-grade materials, such as iron ore concentrates, also checked any significant increase in prices of the high-grade fines, which are represented by the 65% Fe iron ore index.
Seaborne iron ore concentrates have largely traded at discounts to the 65% index since April, with the discounts attracting increased buying activity from mills in recent weeks. The supply increase this year was mainly in concentrates from Canada, Peru, Brazil, and the Chinese domestic market and that was also a reason why the materials had been attracting a discount, said an analyst at one trading house.
PRICE MOVEMENT
Chinese mills saw some improvement in margins from 0-200 yuan to 100-300 yuan per MT amid the decline in the prices of raw materials in the middle of August. A trading source in southern China said mills were now quick to respond to price changes based on the cost-benefit analysis of various product types that go as input feed for steelmaking in their blast furnace, adding that he had observed a rise in inquiries for lump, low-alumina Brazilian Blend fines and concentrates in
September.
“Iron ore lump experienced the largest increase in value compared with other products in September, followed by concentrates and pellet, given the cost-efficiency and improved margins [for such material],” another trading source in Shandong province said. “We used concentrates for sintering rather than pellet-making, to blend with 58% Fe Australian or Indian fines,” a mill source in Shandong province commented.
“Concentrates can compete with 65% Fe Carajas materials from Brazil to some extent,” he said, adding that Carajas would also be increasingly used due to its low price spread with 62% Fe fines.
The optimism stems from expectations that restocking demand will support prices for iron ore after the holidays, with the tight restrictions on steelmaking operations in northern Chinese cities such as Tangshan in the run-up to the holidays expected to support prices of steel products.
Some traders, however, said that falling international scrap and steel prices may pose downside pressure on China’s domestic steel market, and iron ore prices in general. Limited demand for finished steel and widespread negative sentiment has affected global scrap prices recently.
The recent drop in iron ore prices amid improvements in Brazilian and Australian supply and a weak global steel market has led to buyers renegotiating the premium they had agreed with Brazil’s Vale under annual contracts for pellet shipments to be made in the last three months of this year.
Other miners have also responded to the tougher market conditions, with FMG widening the downward price adjustment for its lower grade products.
Report By: Shahriyar Yusefi
