Iron Ore Market in Brief: Seaborne prices weakening among steel dip, dollar appreciation
Seaborne iron ore prices were softened on May 13 among weaker steel markets and an appreciation of the United States dollar against the Chinese Yuan.
Commodity | Price | Difference / MT |
MB 62% FE IRON ORE INDEX | $96.10 per tonne cfr Qingdao | -1.14 USD |
MB 62% FE PILBARA BLEND FINES INDEX | $94.78 per tonne cfr Qingdao | -1.14 USD |
MB 62% FE IRON ORE INDEX-LOW ALUMINA | $99.92 per tonne cfr Qingdao | -0.58 USD |
MB 58% FE PREMIUM INDEX | $86.61 per tonne cfr Qingdao | +0.01 USD |
MB 65% FE IRON ORE INDEX | $111.40 per tonne cfr Qingdao | -0.10 USD |
MB 62% FE CHINA PORT PRICE INDEX | 686 yuan per wet metric tonne | +2 Yuan |
KEY DRIVERS
China’s rebar and hot-rolled coil futures prices retreated at the start of the week, while domestic spot market prices fell by 10-20 Yuan (USD1.50-2.90) per ton. Seaborne iron ore trading was not very active over the day, with no transaction confirmed as of 6.15pm Singapore time.
Some market participants expect tradable levels of mainstream seaborne brands to decline in line with the price dip in the 62% Fe derivatives on the Singapore Exchange, while others estimated prices would be stable compared with Friday’s levels, especially for the Brazilian Blend fines and Iron Ore Carajas, which are undergoing supply tightness.
The stronger exchange rate between the US dollar and the Yuan - at almost 6.82 compared with about 6.73 a week earlier – according to Oanda.com, has also put pressure on dollar-denominated seaborne iron ore prices, while supporting prices at Chinese ports. Port trading activity remained lukewarm during the day despite stronger prices, apparently for Pilbara Blend fines.
Daily MB 62% Fe Iron Ore Index eased by USD 1.14 per ton, while the daily 65% Fe Iron Ore Index decreased by USD 0.10 per ton.
Much of the conversation surrounding iron ore demand in China - the world’s largest consumer of iron ore - is tied to the country’s macroeconomic health. Market participants consider copper and iron ore to be proxies for China’s macroeconomic conditions and outlook, although, volumes involving copper derivatives constitute a much bigger proportion of the physical market compared with the ratios in iron ore.
Contracts are both needed and are complimentary,” Teo said. Basis risks often outweigh liquidity risks for participants, Janice Kan, senior vice president and head of derivative products, SGX said while explaining the rationale behind the exchange’s launch of the 65% derivative contract last year despite the wide use of the SGX’s 62% iron ore derivative that launched nearly 10 years ago.
The 65% Fe iron-ore derivative contract launched on December 3 and is settled based on 65% Fe iron ore derivative contract. The contract has had over five million tones traded so far, with open interest breaching one million tones. Physical demand for high-grade iron ore will also be a function of mills’ profitability, besides environmental factors, in the future, Ji Chao, assistant general manager of Baoshan Iron and Steel said.
QUOTE OF THE DAY
“Limited saleable cargoes of Brazilian Blend fines, whether from Vale’s Malaysia distribution center or at Chinese ports, are underpinning prices for the low-alumina product; and the case is similar for Iron Ore Carajas,” a trader in east China told.
Report By: Mohammad Reza Barakchian
