China’s iron ore market still on uptrend, Indian miners sharply hike prices

Over the past week China's domestic iron ore market has continued its rising movement, with a rapid increase seen in import quotations. Looking at the current situation, the upward trend is not expected to last long as some negative factors still exist in the Chinese iron ore market.

In the past week, the international shipping freight market continued to move up. On November 19, the Baltic Dry Index (BDI) closed at 4,661 points, up 707 points compared with the level on November 12. On November 19, the average freight charge from Brazil to Beilun Port in China was $46.55/mt, up by $3.61/mt week on week. Meanwhile, the average freight rate from Western Australia to Beilun on November 19 was $23.26/mt, a rise of of $4.42/mt week on week.

Iron ore prices in the Chinese market still retained their climbing trend during the past week. The price of 66 percent damp base iron ore in Tangshan, Hebei Province is up by RMB 10/mt ($1/mt) week on week to the level of RMB 640/mt ($94/mt, tax excluded), while the market prices in the northeastern regions stand at RMB 530/mt ($78/mt, damp base/tax excluded). Meanwhile, the prices of 63.5 percent Indian fine ore have risen by $3/mt to $85/mt FOB, while the CFR price (Tianjin Port) is up by $3/mt to $105/mt. Additionally, the price quotation of 63.5 percent Indian ore is now at RMB 800/mt ($117/mt) at Chinese ports, up RMB 30/mt ($4/mt) week on week, while the deal price of 62.5 percent Australian PB fines is up by RMB 40/mt ($6/mt) week on week to RMB 800/mt ($117/mt), with the market price of 65 percent Brazilian fine ore standing at RMB 850/mt ($125/mt), up by RMB 50/mt ($7/mt) week on week.

Against the background of the increased Indian ore export quotations, the iron ore market in China has posted an overall upward trend in the past week. It is reported that Indian miners have sharply hiked their quotations in recent days, with deals being concluded briskly by Chinese buyers, thereby causing quotations of 63.5 percent Indian fine ore to rise from the previous level of $100/mt FOB to $105/mt FOB. Generally speaking, most of the buyers in question are big traders, while mills and smaller traders are still maintaining a cautious approach to purchases. Currently, there are still concerns over the increased export quotations of overseas iron ore. First of all, domestic ore prices are already lower than the quotations of imported Indian ore. For instance, the general market prices of iron ore delivered to various factories are at around RMB 900/mt ($132/mt) in Wu'an city, Hebei Province, while the average costs of Indian ore delivered to factory are much higher than this level - based on the FOB quotation of $105/mt. In addition, market players are generally adopting a cautious attitude towards trading as the end of the year gets closer.

At present, the overall domestic iron ore market still looks quite weak as the economic recovery needs to be consolidated further. Despite the slight rise observed in steel prices, high outputs and lofty inventory levels are still causes of great concern in the steel market. Furthermore, current iron ore prices are now at relatively high levels compared with steel prices. Therefore, it will be quite hard for iron ore prices to retain their upward movement without the support of further increases in steel prices.