Iron ore market smooth unlike governments

SteelOrbis Shanghai The tension between China and Australia was the event of last week while the actual iron ore market remained in a stable trend. Last week, Chinese Ministry of Commerce announced a tentative restriction measure that ban import prices over $54/mt for Australian ore and $70/mt for Brazilian ore. The measure aroused Australian government's close interest. The Chinese Ministry of Commerce later cancelled the policy and resumed the previous registration system. Thus, the strained situation alleviated. Yesterday, March 16, the National Development and Reform Commission and the Ministry of Commerce made a joint declaration stating that the Chinese government keeps a close eye on the 2006 long term iron ore price negotiations and that the pricing of iron ore should be in the interest of establishing a fair international economic order as well as realizing the win-win solution for both parties. A market researcher in the Ministry of Commerce pointed out that the buyers and sellers of iron ore were not even. According to the researcher, the seller party constitutes a monopoly while the buyer party is highly diversified, requiring the intervention of the government. Nevertheless, Australia does not agree with it. The Chinese government's intervention in the iron ore price negotiations aroused immediate reactions in Australia. The person in charge of the Australian steel industry noted that the Chinese government should not intervene in the price negotiations of importers and exporters. The Brazilian Ministry of Foreign Affairs commented on Wednesday, March 15, that Chinese government should clarify whether it would intervene in the iron ore price negotiations. Things got more complicated as India also joined in the price negotiations. Indian iron ore producers also want to hike their prices by 5 to 8 percent. Besides, Indian steelmakers hope Indian government to reduce iron ore supply to South Korea and Japan, and not supply iron ore to China at all in order to meet the domestic iron ore demand in India. Chinese government's efforts are not expected to outplay the market forces. Meanwhile, the Chinese iron ore market remained stable, yet, the commercial activity did not pick up. The imported iron ore prices have seen minor fluctuations, and both the inventories at ports and the ocean freight kept going down. Some steel mills lowered their purchasing prices, which had hardly any influence on the overall market condition. The quantity of iron ore at ports had increased considerably after market players' large purchases in a short time with the expectation of an increase in iron ore prices. However, since last week, the quantities experienced a sharp fall due to the cessation of large purchasing activities. Therefore, ocean freight went down as well. Currently, the ocean freight for shipments from Brazil to China is at $23,541/mt, down $1,395/mt from a week ago, and from West Australia to China is at $10,370/mt, down $1,205/mt. According to the data released on March 3, the total inventory of China's eighteen major ports was at 35.96 million metric tons, down 240,000 metric tons weekly.