Iron Ore Market in Brief: with the huge losses in the Futures market, seaborne prices plunged
For the first time since early September, yesterday on October 16th the mid-grade iron ore seaborne prices CFR Qingdao fell below USD 90 per MT as a result of a quick downturn in the futures market transactions.
Commodity | Price | Difference / MT |
MB 62% FE IRON ORE FINES INDEX | USD 87.86 per ton CFR Qingdao | -5.14 USD |
MB 62% FE PILBARA BLEND FINES INDEX | USD 86.90 per ton CFR Qingdao | -5.14 USD |
MB 62% FE IRON ORE INDEX-LOW ALUMINA | USD 86.38 per ton CFR Qingdao | -5.22 USD |
MB 58% FE PREMIUM INDEX | USD 76.73 per ton CFR Qingdao | -4.25 USD |
MB 65% FE IRON ORE INDEX | USD 93.90 per ton CFR Qingdao | -5.00 USD |
MB 62% FE CHINA PORT PRICE INDEX | 715 Yuan per wet metric ton | -17 Yuan |
MARKET DRIVERS
China’s steel and iron ore futures were influenced by the huge losses yesterday, where the iron ore contract of the benchmark was closed over 4% less than the previous day. Moreover, Singapore Exchange’s iron ore derivatives also dropped, for instance, the November 62% Fe contract fell to around USD 83.40 per MT, which was settled at USD 87.86 per MT the earlier day.
Some marketers believe the downward trend in the ferrous derivatives may be attributed to hopes on the looser steelmaking restrictions over November 2019 to March 2020 period than the similar period last winter. Generally, steel products demand in winters fall slowly due to the construction sectors’ being sluggish. Hence the weaker steel prices typically affect mill margins causing them more sensitivity to raw materials costs.
According to a Singapore Trader, another impressive factor on the downward trend was the supply improvement by iron ore from Australia and Brazil which piled on the market pessimism. At Chinese ports, the spot transactions of iron ore took place at lower prices compared to Tuesday. This was while the massive price drop limited the number of reported deals.
In the seaborne market, a miner was heard to have sold cargo through a tender at an index-linked price close to the last known transacted discount level to the November index. Meanwhile, Anglo-Australian miner Rio Tinto shipped 86.1 million MT of iron ore in the July-September quarter of 2019, this volume was up 5% year on year, according to the company’s third-quarter operations review published on Wednesday, October 16.
The higher shipments were a sign of recovery from production problems at the end of March when the company’s operations in Western Australia were disrupted by a cyclone. The miner has maintained its shipment guidance for the year at 320-330 million MT and has also kept its iron ore unit cost guidance unchanged at USD14-15 per MT.
QUOTE OF THE DAY
“The drop in [steel] futures was hard and fast, [on] hearing that the restrictions on [steel] mills will be less strict this year, which means there is going to be an oversupply of steel products with demand being low during the winter season,” a Singapore-based futures analyst said.
PORT PRICES
Pilbara Blend fines traded at 695-715 yuan per MT in Shandong province and Tangshan city on Wednesday, compared with 720-730 yuan per MT on Tuesday, according to sources. The latest range was equivalent to USD 91.40-94.10 per MT CFR China in the seaborne market.
DALIAN COMMODITY EXCHANGE
The most-traded January iron ore futures contract closed at 617 yuan per MT on Wednesday, down by 27 yuan per MT from Tuesday’s closing price.
Report By: Mehrdad Najafi
