Friday, 03 April 2009 12:16:03 (GMT+2) -
Given the production cuts and purchase price reductions implemented by domestic mills, China's iron ore market has registered a sharp shrinkage in market demand over the past week, with a continuous slide being observed in market prices. Meanwhile, Indian ore has gradually lost its competitiveness in the Chinese market, due to various increased charges and costs, and also due to the strengthened efforts of Australian and Brazilian mines in relation to spot ore exports.
Weekly change (RMB/mt)
Iron ore concentrate
damp base (iron content: 66 percent)
India fine ore
Last week, the international shipping freight market remained soft. By the end of trading on April 2, the Baltic Dry Index (BDI) had declined 166 points week on week to 1,574 points. On April 2, the average freight charge from Brazil to Beilun Port in China was $15.42/mt, down by $1.09/mt compared with the level on March 26. Meanwhile, the average freight rate from Western Australia to Beilun on April 2 was $6.5/mt, down $0.44/mt compared with the rate on March 26. In addition, the freight cost of Indian ore to China's major ports was at $10.62/mt, a slip of $0.55/mt week on week.
China's domestic iron ore market still maintained its softness over the past week, accompanied by a minor reduction in imported ore prices. At present, the price of 66 percent damp base iron ore in Tangshan, Hebei Province is RMB 510/mt ($75/mt, tax excluded), while the market prices in the northeastern regions are at the level of RMB 450/mt ($66/mt, damp base/tax excluded). Meanwhile, the prices of 63.5 percent Indian fine ore are at $54/mt FOB, while the CIF price (Tianjin Port) is around $63-65/mt. Additionally, the price quotation of 63.5 percent Indian ore is at the level of RMB 550/mt ($81/mt) at Chinese ports, while the deal price of 62.5 percent Australian PB fines has declined to RMB 550/mt ($81/mt), with the deal price of 65 percent Brazilian fine ore at around RMB 600/mt ($91/mt), generally down by RMB 10-20/mt ($1-3/mt) week on week.
As the 2009 iron ore contract talks have still not yielded a result and may continue for some time yet, the China Iron and Steel Association has suggested that domestic mills should buy quantities of iron ore on the spot market for the time being as a transitional measure, recommending, however, that the spot prices at which they purchase should not exceed 60 percent of the 2008 long-term contract price. Looking at the current situation, given the continuous sluggishness in the domestic finished steel market, for the month of April China's leading mills again slashed their ex-factory prices significantly. Meanwhile, mills in Europe, Japan and South Korea are also in a difficult situation. Furthermore, some Japanese and European mills have urged mines to cut their prices by 60 percent.
In recent days, Indian ore has lost its competitive advantage in the Chinese market on account of relatively high freight charges, duties and other costs, which have pushed the quotations of Indian ore above those for Australian and Brazilian ore. Currently, the big three mining giants are exerting strong efforts to boost their sales by means of discounts, aiming to increase their export market shares.
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