Chinese iron ore market moves up slightly

In the wake of its recent temporary stability, China's domestic iron ore market again moved up over the past week. Given China's rising crude steel output and the declining levels of iron ore inventories at its ports, demand remains strong in the domestic iron ore market. Looking at the current situation, if local crude steel production remains at current levels, domestic iron ore prices will continue to go up steadily.

In the past week, the international shipping freight market climbed up before indicating a downward correction; however, the market still registered a strong upward trend on the whole. On October 29, the Baltic Dry Index (BDI) closed at 2,986 points, up 69 points compared with the level on October 22. On October 29, the average freight charge from Brazil to Beilun Port in China was $31.08/mt, up by $1.25/mt week on week. Meanwhile, the average freight rate from Western Australia to Beilun on October 29 was $11.71/mt, a slip of of $0.4/mt.

Domestic ore prices in the Chinese market moved up by a small margin during the past week, against a background of relatively strong market demand. At present, the price of 66 percent damp base iron ore in Tangshan, Hebei Province is at the level of RMB 600/mt ($88/mt, tax excluded), while the market prices in the northeastern regions stand at RMB 500/mt ($73/mt, damp base/tax excluded). Meanwhile, the prices of 63.5 percent Indian fine ore have risen by $1/mt to $76/mt FOB, while the CFR price (Tianjin Port) is up by $3/mt to $94/mt. Additionally, the price quotation of 63.5 percent Indian ore is now at RMB 730/mt ($106/mt) at Chinese ports, up RMB 10/mt week on week, while the deal price of 62.5 percent Australian PB fines is up by RMB 20/mt ($3/mt) week on week to RMB 730/mt ($107/mt), with the market price of 65 percent Brazilian fine ore standing at RMB 760/mt ($111/mt).

Remaining on a positive trend on the whole, China's iron ore market has recently registered a rapid drop in inventories at the country's ports. Meanwhile, following their previous continuous ascension, domestic finished steel prices have started to decline again. Currently, China's crude steel production is still relatively high, and the resulting strong market demand for iron ore will provide support for iron ore prices in the short term. China's crude steel production in September totaled 50.71 million mt, equivalent to an annual output of 617 million mt, with the average daily crude steel output during the month in question reaching 1.6903 million mt - an all-time historical high. In September, China's iron ore imports totaled 64.55 million mt, also constituting an all-time record high, up 64.67 percent year on year. From January to September, China's total iron ore imports amounted to 469.36 million mt, up 35.7 percent compared with the same period last year. At present, Chinese mills have not shown any signs of slowing down their production, and so market demand for iron ore still remains strong. Moreover, iron ore inventory at the ports has been declining in recent days, with low stocks of iron ore also reported at various mills. In this context, the Chinese iron ore market is expected to continue its steady upward movement in the near future.