With the approach of April, the iron ore contract price talks should be drawing to a conclusion. Both the European steelmakers and the CISA have expressed their opposition to the 80-90 percent increase sought by the big three iron ore producers. Meanwhile, the annual pricing system seems to have approached collapse, with a quarterly pricing system or a spot pricing system as alternatives.
Product Name | Specification | Average Price (RMB/mt) | Price ($/mt) | Weekly change (RMB/mt) |
Iron concentrate | damp base (iron content: 66 percent) | 880 | 129 | +70 |
India fine ore | 63.5 percent | 1,120 | 164 | +90 |
In the past week, the international shipping freight market registered a slight decline. On March 17, the Baltic Dry Index (BDI) closed at 34,276 points, up 111 points compared with last week. On March 17, the average freight charge from Brazil to Beilun port in China was $26.92/mt, down by $2.1/mt week on week. Meanwhile, the average freight rate from Western Australia to Beilun on March 17 was $11.10/mt, up by $0.06/mt compared with March 11.
Over the week in question, a significant price increase has been observed in the Chinese iron ore market. At present, the price of 66 percent damp base iron ore in Tangshan, Hebei Province is at the level of RMB 880/mt ($129/mt, tax excluded), while the market prices in the northeastern regions stand at RMB 780/mt ($114/mt, damp base/tax excluded), both up by RMB 70/mt ($10/mt) or nearly 10 percent week on week. Meanwhile, the prices of 63.5 percent Indian fine ore have risen to $133/mt FOB, while the CFR price (Tianjin Port) is at $145-148/mt, both increasing by $6/mt . In addition, quotations of 63.5 percent Indian ore are up by RMB 90/mt ($13/mt) to RMB 1,120/mt ($164/mt) at Chinese ports, while the deal price of 62.5 percent Australian PB fines is at RMB 1,130/mt ($166/mt), up by RMB 100/mt ($14/mt) week on week, with the market price of 65 percent Brazilian fine ore up by RMB 100/mt ($14/mt) to RMB 1,170/mt ($172/mt).
Due to the significant price increase sought by the big three iron ore producers, and the possibility of implementing a quarterly pricing system, a great increase has been observed in the quotations of Indian ores and spot prices. Currently, traders and mills are very cautious and are making less purchases. Looking at the current situation, with the tight availability of high-grade Indian ore and PB fines, some traders have closed their sales and are waiting for further price increases. It is very likely that import ores and domestic ores will both trend up in the future.
In recent days, most Chinese mills have received a letter of notification from Brazilian miner Vale. The letter states that Vale will implement a quarterly pricing policy regarding iron ore exports to China, with the price for Q2 to be set at $130-136/mt. Based on the current situation, the possibility for a significant increase in the 2010 iron ore contract price is growing and some Chinese mills have already accepted the quarterly pricing system.