Indian export offers for high grade iron ore fines (with Fe content of 63.5 percent and higher) have gained an unprecedented $9.90/mt during the past week, rising to a nearly two-year high of $75.40/mt CFR China, as the market rally gained further momentum on the back of huge transaction volumes and optimism over finished steel prices, traders said on Friday, November 11.
“While the upturn has been evident for some weeks, the latest surge in offers has caught even the most diehard bullish trader by surprise,” an Odisha-based miner-exporter said.
“Signals of capacity cut targets by Chinese steel mills are on course and will be pursued aggressively. This is expected to boost finished steel prices, improve margins of steel producers and the latter’s ability to restock raw materials,” the miner-exporter added.
Market sources said that quite a few transaction volumes have been reported for 45,000-50,000 mt, volumes not heard in the market during the past year and a half, indicating the strong restocking and renewed appetite of Chinese steel mills.
The sources pointed out that the Indian physical market is closely tracking large speculative positions in the international futures market and is yet another indicator of bullish sentiments.
However, even amid the buoyant conditions, a section of the market has advocated caution observing that the rally lacked underlying fundamental support.
At least two traders pointed out that the spurt in iron ore offers was largely triggered by a surge in coking coal prices and large speculative positions in futures. They said that the market is yet to take a stand on the medium-term and long-term outlook. Major uncertainties concern the trade policies of the new US administration, the talk of renegotiation of multi-lateral trade pacts between US and its major trading partners, and the impact of this on the commodity markets.
Aggravated trade investigations into imports of Chinese steel to the US and protectionist measures for the US steel industry are issues which have yet to be factored into current market sentiments, the two traders added.