Iron ore prices regained ground Wednesday after a three-day losing streak. The need to replenish steel raw materials and tight ore availability lifted spot prices. Platts assessed the 62% Fe Iron Ore Index up $1/dmt at $146.25/dry mt CFR North China.
During the earlier part of the day, buying interest for iron ore remained capped as both sellers and buyers steered away from the spot market in the midst of unclear market direction on steel prices. Market participants pegged the price of 61%-Fe Pilbara Blend fines at $142-144/dmt CFR China.
But as the news of stronger performance in the US and China equity markets was heard later in the day, buying interest gained traction.
Tangshan-based Yanshan Steel awarded its weekly billet tender at Yuan 3,260/mt ex-works Wednesday, Yuan 40/mt higher than the previous week. Spot prices of square billet in Tangshan edged Yuan 20/mt higher from Tuesday to Yuan 3,280/mt ($523) ex-stock, according to a mill source in the region. Rebar futures however remained range bound as the most active October Shanghai rebar futures contract fell Yuan 2/mt to close at Yuan 3,937/mt ($627/mt), and settled Yuan 20/mt higher from Tuesday at Yuan 3,941/mt.
However, some sources attributed low iron ore inventory levels among the Chinese mills as the real reason behind the gain in raw material prices. A Hebei-based steelmaker who concurred said that most Chinese mills keep an average iron ore inventories of nearly four weeks and there is a need to replenish more iron ore to maintain production.
"The market is more active today, I am seeing more buyers searching for iron ore," said the Hebei-based steelmaker.
Overall there was more buying interest in iron ore Wednesday, a Hong Kong-based trader said this was due to a lack of Australian material in the spot market.
"There is only about 30 million mt of Australian ore [at] the Chinese ports now, which is low. Mills have also been suppressing their buying appetite, [waiting] for the market to come down, [...] and it has considerably. At least buying now is cheaper than in the last two weeks."
A trader in South China said that since most mills have yet to really procure much spot ore after the Chinese New Year holidays, it was "about the right time to replenish now."
However, most industry sources still maintained that the iron ore market was very weak as mills are unable to cope with the comparatively high raw material prices.
"There is still room for iron ore spot prices to fall," a Zhejiang-based trader said. "Steel prices have yet to recover much ground so there needs to be some balance in the market between that and raw material costs."
A Chinese source at an international trading house said it was difficult for steelmakers to procure iron ore at current levels because raw materials, across the board, "are too expensive. Production costs are really putting pressure on the mills so iron ore needs to come off even more."
The source added that most mills were either fully relying on their long-term contractual volumes for production, or procuring smaller amounts of ore from the ports if they needed to.
"If they really have to buy seaborne spot material, then they'd rather pay index-linked floating prices in order to minimize risk in such an uncertain market."
A Beijing-based trader said they did receive some buying inquiries from downstream clients Wednesday, but interest was for index-linked prices for the less prompt April-May period, and there was "no commitment on cargoes as most remain cautious about buying now."
Among the deals done Wednesday, Australian miner Rio Tinto sold 165,000 mt of 61%-Fe Pilbara Blend fines at $147.35/dmt CFR China Wednesday to trading company General Nice, according to traders who received the tender. Sources at General Nice declined comment on the matter. The shipment will load March 16-25.
A source close to the matter said Rio Tinto received "a healthy number of bids" for the cargo, and after the trade was concluded, they received interest from two buyers willing to match the price of $147.35/dmt CFR China for a second PB fines shipment.
The 62% Fe IODEX was assessed $1/dmt higher after accounting for the PB fines trade, as well as notional values for other brands of ores which are usually normalized to the 62% Fe assessment. With the PB fines cargoes arriving in China about March 31-April 1 after an estimated 11-day journey from Australia, Platts also factored in an adjustment for time in the normalization process.
Although most market participants deemed the trade price too high to be repeatable, expectations of the repeatable price of PB fines cargoes did go up through the day, reaching the $145-146/dmt CFR China levels.
Elsewhere, sources reported that trading house Noble had sold to a mill, a 80,000 mt 62/62%-Fe Indian fines cargo at $140-141/dmt CFR North China, this cargo has 3.5% alumina and 5% silica and is on the water. This deal could not be confirmed but was discussed in the market.
Also in India, Indian trading house Radiant World was offering a 80,00mt 61/61%-Fe Indian fines cargo at $143/dmt CFR North China, this cargo has 4% alumina, 5% silica, the cargo is loading in Vizag promptly.
Meanwhile, Australian miner Arrium Mining and Minerals was offering a co-loaded fines and lump cargo Tuesday, in a tender that closed Wednesday at 11 am Singapore Time (0300 GMT), according to traders who received the tender. It was not known if the tender was awarded.
The first was 80,000 mt of 57%-Fe fines, which contained 2.8% alumina, 7% silica, 0.06% phosphorus, 0.07% sulfur and 4% moisture. The second was 90,000 mt of 59%-Fe lump, which contained 1.8% alumina, 6% silica, 0.055% phosphorus, 0.05% sulfur and 4% moisture. Both cargoes will load over March 26-April 4.
On the CBMX platform, a 58%-Fe Australian lump cargo was heard to have traded at $133/dmt CFR China, according to a trader with access to the platform. The 170,000 mt shipment will load March 10-17. On the globalOre platform there were several bids, for 60-62%-Fe cargoes.
PORT STOCKS WEAKEN
Port stock prices in China were weakening. A separate Beijing-based trader was offering Wednesday dockside 61%-Fe Australian Pilbara Blend fines at Rizhao, northern China, at Yuan 1,010/wmt ($144/dmt on an import parity basis) free-on-truck. This was lower than the Yuan 1,020-1,030/wmt offer levels at Rizhao from the day before.
"We tried to offer at Yuan 1,020/wmt [Tuesday], but there were no takers," the trader said. "We've lowered it by Yuan 10 today, but interest is scant so far."
Source: Platts