China’s iron ore market sees slowdown of decline rate

Friday, 11 September 2009 13:27:10 (GMT+3)   |  
       

The Chinese iron ore market recorded a slowdown in its downward movement during the past week, with a certain improvement observed in trading activity. Currently, the domestic finished steel market is the principal influence on the trend of China's iron ore market given the general equilibrium of iron ore supply and demand at present.

Product name

Specification

Average price

(RMB/mt)

Price  ($/mt)

Weekly change (RMB/mt)

Iron ore concentrate

damp base (iron content: 66 percent)

570

83

-10

India fine ore

63.5 percent

650

95

-70

The international shipping freight market has maintained an overall stability during the past week. On September 9, the Baltic Dry Index (BDI) closed at 2,462 points, up 49 points compared with the level on September 2. On September 9, the average freight charge from Brazil to Beilun Port in China was $28.88/mt, down by $0.36/mt week on week. Meanwhile, the average freight rate from Western Australia to Beilun on September 9 was $10.18/mt, a slip of $0.93/mt week on week.

Against the background of improved trading, the iron ore market in China has slowed its downward movement over the past week. At present, the price of 66 percent damp base iron ore in Tangshan, Hebei Province is down by RMB 10/mt ($1/mt) week on week to the level of RMB 570/mt ($83/mt, tax excluded), while the market prices in the northeastern regions stand at RMB 490/mt ($72/mt, damp base/tax excluded), down RMB 10/mt ($1/mt) week on week. Meanwhile, the prices of 63.5 percent Indian fine ore have dropped by $2/mt - to $63/mt FOB, while the CIF price (Tianjin Port) has fallen again by $3/mt week on week to $80-82/mt. Additionally, the price quotation of 63.5 percent Indian ore has slipped by RMB 30/mt ($4/mt) week on week and is now at RMB 650/mt ($95/mt) at Chinese ports, while the deal price of 62.5 percent Australian PB fines has declined by RMB 10/mt ($1/mt) to RMB 660/mt ($97/mt), with the market price of 65 percent Brazilian fine ore at RMB 690-700/mt ($101-102/mt).

Despite the continuous decrease in the Chinese finished steel market in August, domestic steel production remained on the rise. In August, China's 71 key large and medium steelmakers posted a total crude steel production of 39.43 million mt, with estimated production at around 51.65 million mt for the whole country (i.e., including small mills), equivalent to daily outputs of 1.272 million mt and 1.666 million mt respectively. Although the domestic steel market has been characterized by sluggishness over the past month, steel mills are still able to make a profit and thus production levels still seem strong, with the result that there has been very high demand for iron ore. If calculated based on the daily crude steel output of 1.66 million mt, China's iron ore consumption in September will reach 77 million mt.

With China's domestic finished steel prices fluctuating within a small range in the past week, the iron ore market in China has gained strength and has gradually become stable, accompanied by certain improvements in inquiries and commercial activities. Currently, iron ore inventory at the Chinese ports totals around 73-74 million mt, indicating relatively sufficient levels of market supply on the whole. In early September, with miners in Brazil and Australia having considerably reduced their spot ore shipments to China, Chinese traders have increased their inquiries to Indian iron ore suppliers. Looking at the current situation, both supply and demand in the iron ore market have appeared quite active in recent days. In the short term, steel prices will continue to be the main factor determining the future trend of China's iron ore market.


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