Iron Ore Market in Brief: Seaborne prices remain flat; China markets to resume on May 6
Seaborne iron ore prices remained flat on Friday May 3, with the major Chinese market still muted due to the ongoing Labor Day public holiday.
KEY DRIVERS
The China markets have remained closed as part of the ongoing Labor Day holiday since Wednesday May 1, and re-open on Monday May 6. Both the daily 62% Fe Iron Ore Index and the 65% Fe Iron Ore Index were calculated as flat from the previous day. The unchanged prices reflected a lack of visible market activity due to the Labor Day holiday in China.
Key talking points in the iron ore market before the annual Singapore Iron Ore Week, which takes place on May 6-10, 2019. There have been market concerns over the potential short supply of Brazilian iron ore since Vale’s tailings dam accident in late January and the following operation suspensions. While ex-China markets have felt the pinch of reduced supply like pellets from Vale, Chinese steelmakers have so far stayed relatively cool on low-alumina Brazilian fines, given the cushion of port stocks in China and availability of low-alumina domestic concentrate.
However, iron ore shipments from Brazil have significantly slowed down since April, partly due to heavy rains in north Brazil. Based on the 45-day voyage from Brazil to China, Chinese buyers may start to sense tighter supply from the second half of May. Cyclone Veronica hit Western Australia late in March, causing port closures and logistics facilities damage, which both affected iron ore shipments. Both Rio Tinto and BHP lowered their iron ore production guidance for their current financial year.
Shipment data shows that Australian iron ore supplies have been recovering in April and some sources said the miners have been trying to catch up on original shipping schedules. However, others fear there could be overhauls later that could have an impact on supplies later in the year. With a notable pick-up in steel prices in April, Chinese steelmakers’ profit margins have quickly widened above 500 Yuan per ton, leading them to refocus on productivity compared with cost in choosing iron ore.
After capacity shutdowns in previous years, however, there may be limited potential left for the domestic concentrate production to ramp up further, some said. While the latest steelmaking emissions restrictions have turned out to be less onerous than last year’s winter heating season, there have still been various interim curbs on production in different parts of the country potentially causing further disruption.
Market participants expect Beijing’s implementation of pollution control measures to be generally stricter year on year, but it remains to be seen how the policies will actually be put in place.
Report By: Mehrdad Najafi
