Iron Ore Market in Brief: Market with the absence of Chinese participants with flat seaborne prices
Seaborne iron ore prices were still flat on Wednesday, October 2 greatly due to Chinese National public holidays which continues till October 7.
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
All china’s markets remained closed for the seven day-long National Holiday and they will be back to Trading on Tuesday, October 8th.
In accordance with published fallback measures, a lack of visible market activity due to the public holiday led to the daily iron ore indices being rolled over.
Still no visible activity in ports and Dalian Commodity Exchange also closed for public holidays.
The direct-reduced (DR) iron pellet premium dropped for shipments in the fourth quarter on falling demand due to buyers increasing the steel scrap share in steel melting to cut production costs. Iron ore DR-grade pellet premium, Middle East reference to $41 per MT on Monday, September 30, down from USD62 per MT on August 30. Meanwhile, the average of index for iron ore 65% Fe, Brazil-origin fines, CFR Qingdao, which is used as the basis of settlement for pellet premium contracts, was USD99.84 per MT in September, slightly up from USD99.17 per MT in August.
Several buyers reported that the premium had declined to USD40 per MT. “The discounts differ from one customer to another, the range of discounts is very vast, and the upper limit is the USD40s,” another source said without specifying the lower limit. Suppliers were also heard not to have settled revised premiums with all customers and are still negotiating with some clients, however.
“Suppliers have started to cut premiums for DR pellet shipments in the fourth quarter under the buyers’ pressure,” one source from the Middle East and North Africa (the Mena) region said. “But even such a decline is not enough, considering the scrap price drop.” The source added that suppliers will not agree to go much lower, however, because it will impact a lot of negotiations for DR pellet supply in 2020, which will start soon.
Daily index for steel scrap, HMS 1&2 (80:20 mix), US origin, CFR Turkey is a strong indicator of the global scrap market. In September, it averaged USD242.26 per MT, slumping from USD284.04 per MT in August, on reduced demand. Scrap is a substitute for direct-reduced iron (DRI) in steel melting, which requires DR pellet as a feedstock. “Buyers are increasing scrap consumption in steel melting because of its low price, which is decreasing every day,” according to a supplier.
Buyers are also negotiating to pay lower than the agreed USD58-per-tonne premium for shipments of blast furnace (BF) pellets, which can also be used for DRI production, substituting a limited percentage of DR pellets according to production technologies.
A few market sources estimate that buyers of BF pellets are looking to lower the premium by about USD20 per MT for the fourth quarter, in line with the DR pellet market. “Premiums are falling because the supply and demand balance in the pellet market has changed dramatically,” the other supplier said.
Vale has announced cuts to its iron ore pellet production guidance for 2019 to 43 million MT from 45 million MT previously “This decision is in line with the margin over volume strategy and efficient capital allocation to adapt the value chain and meet prevailing market conditions,” the company said on Thursday, September 26.
Report By: Encieh Arbabi
