Chinese iron ore market retains bearishness

Friday, 13 March 2009 17:36:38 (GMT+2)   -  


Under the combined effects of weakening demand from mills, increased iron ore imports and ascending inventory levels at the ports, the Chinese domestic iron ore market has fallen considerably in recent days. Meanwhile, China's iron ore imports registered a new high at 46.74 million mt in February.

Product name

Specification

Average price

(RMB/mt)

Price

($/mt)

Weekly change (RMB/mt)

Iron ore concentrate

damp base (iron content: 66 percent)

560

82

-20

India fine ore

63.5 percent

590

86

-10

Last week, the international shipping freight market posted moderate fluctuations. By the end of trading on March 12, the Baltic Dry Index (BDI) stood at 2,271 points. On March 12, the average freight charge from Brazil to Beilun Port in China was $20.46/mt, down by $0.72/mt compared with the level on March 6. Meanwhile, the average freight rate from Western Australia to Beilun on March 12 was $7.48/mt, down $0.33/mt compared with the rate on March 6. In addition, the freight cost of Indian ore to China's major ports has risen to $10.11/mt, an increase of $0.79/mt week on week.

According to the latest statistics released by the Chinese customs authorities, iron ore imports in February reached an historical monthly high of 46.74 million mt, up 43 percent compared with the level of 32.65 million mt in January. China's total iron ore imports in the first two months reached 79.39 million mt, up six percent year on year.

Most mills and traders may be considered to have been overoptimistic at the end of 2008 as regards the future, with this optimism resulting in the subsequent sharp increase in iron ore imports. Moreover, as a result of the recent bearishness in the finished steel market, prices of iron ore have dropped remarkably.

According to the latest report from the China Iron and Steel Association, the country's crude steel production reached 81.34 million mt in January-February 2009, while production of finished steel amounted to 91.8 million mt, up by 2.4 percent and 3.1 percent year on year respectively. China's average daily production of crude steel in February rose to 1.3786 million mt. The rise in February production has also boosted supply levels and so a correction seems very likely in the domestic steel market.

China's domestic iron ore market continued its weak sliding trend over the past week. At present, the price of 66 percent damp base iron ore in Tangshan, Hebei Province is RMB 560/mt ($82/mt, tax excluded), while the market prices in the northeastern regions are slightly down to the level of RMB 470/mt ($69/mt, damp base/tax excluded). Meanwhile, the prices of 63.5 percent Indian fine ore are at $58/mt FOB, while the CIF price (Tianjin Port) is around $68/mt. Additionally, the price quotation of 63.5 percent Indian ore is at the level of RMB 590/mt ($86/mt) at Chinese ports, while the deal price of 62.5 percent Australian PB fines has declined to RMB 610/mt ($89/mt), with the deal price of 65 percent Brazilian fine ore at around RMB 660/mt ($97/mt), down by RMB 20-50/mt ($3-7/mt) week on week.

Given the slack trading performance in the fine ore market, most mines have maintained the previous cuts or halts to their production and generally have no stocks in hand. Currently, most of those in the market are pessimistic as regards the prospects for the future and prefer to suspend activity for the time being.

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