Chinese mills reducing ore purchase in short term

SteelOrbis Shanghai With the sharp decrease in semi finished steel and finished steel prices, the steel mills stepped down the iron ore purchase, which is followed by the decline in the actual deal prices of domestic ore, however, the overall trading volume is not very big. In addition, the imported ore FOB prices remained stable. On July 6, the price of 66 percent damp base iron ore in Tangshan went down RMB 5/mt ($0.6) to RMB 490/mt ($61.3) excluding tax, and that in Beipiao Liaoning province is down RMB 10/mt ($1.3) to RMB 415/mt ($51.9) excluding tax. The price quotation of 63.5 percent India fine ore is RMB 645/mt ($80.7) at Tianjin Port, and the price at Qingdao Port is RMB 640/mt ($80.1). The price of Australian Hamersley 63 and 64 percent fine ore at Beilun Port remains constant at RMB 645/mt ($80.7). Influenced by the sluggish demand, Chinese semi finished steel and finished steel prices have seen sharp decrease. In order to control the costs, the steel mills adjusted the purchase strategy of iron ore. Some steel mills in northern region even lowered the purchase prices, while others maintained it unchanged. However, since the current iron ore inventory of steel mills are all at normal, even lower level, the mines do not agree the purchase strategy from steel mills. Therefore, with the inactive sales of mines, most of the market players hold a “wait-and-see” attitude. Both the supply and demand parties again entered into stalemate, causing the decline in trading volume through last week. According to the person familiar with mines, the slack season of steel consumption has started and steel mills are commencing overhaul works one by one, causing the decline in iron ore demand in short term, while the mines are not willing to sell at low price level because of the insufficient iron ore inventory of steel mills. When the steel mills consume the inventory to a certain extent, they will have to hike the purchase prices. Meanwhile, the person also said that, the mines do not have any high expectation towards the prices and they think the iron ore prices will see slight fluctuations in short term.