Iron ore procurement price sees slight increase in China

Iron ore procurement price sees slight increase in China

Several steelmakers in China announced increases last week in their iron ore procurement prices. A decline in the iron ore inventories of the steelmakers prompted them to increase their procurement prices around RMB 30/ton. The steelmakers had reduced their iron ore purchase quantities due to the stagnant market conditions and with the hope that iron ore prices might see some softening. However, the local iron ore producers and iron ore importers preferred to stockpile their goods instead of selling at lower prices. Thus, the steelmakers were left with very little choice but to raise their procurement prices as their own inventories dwindled. The price increases also come at a time when the steelmakers are preparing to engage in price talks with major Indian iron ore producers. Although the establishment of long-term contracts between Indian iron ore producers and Chinese steelmakers is unlikely due to the fact that the Indian iron industry is highly scattered and some steelmakers in India are against the exportation of Indian ore, Chinese steelmakers are determined to keep India as a trump against Australia and Brazil. Under these circumstances, the prices of iron ore rose slightly over the past week in several of China's domestic markets. Current iron ore procurement prices of major steelmakers vary between RMB 650-820 in northern China, RMB 570-670 in northeastern China, RMB 700-850 in eastern China and RMB 680-750 in central China. In spot markets, the price of 65% Fe iron ore in northeastern China was around RMB 580/ton on Monday, unchanged from a week ago (August 29). The prices in northern China increased around RMB 10/ton during the past week to an average RMB 670/ton. Prices in eastern China remained constant at RMB 750-840/ton, while the prices in central China increased RMB 20/ton over the week to reach RMB 500/ton for 59% Fe concentrate iron ore.