China’s iron ore market still rises though slowdown seen in transactions

Over the past week, the prices of both domestic and imported iron ore in China have maintained their upward trends, although traders have reported a slowdown in transactions. Due to the fluctuations in the domestic steel market, both traders and mills are adopting a cautious approach to new purchases of iron ore. Given the uncertainties in the steel market, most market players are not optimistic on the prospects for a further significant rebound in iron ore prices in China.

In the past week, international freight rates have also rebounded. On July 29, the Baltic Dry Index (BDI) closed at 1,942 points, up 161 points compared with last week. On the same day, the average freight charge from Brazil to Beilun port in China was $18.77/mt, up by $1.75/mt week on week. Meanwhile, the average freight rate from Western Australia to Beilun on the same date was $6.97/mt, up by $0.52/mt compared with the level on July 21.

Over the past week, prices of both domestic and imported iron ore saw a rebound in China. At present, the price of 66 percent damp base iron ore in Tangshan, Hebei Province is at the level of RMB 900/mt ($133/mt, tax excluded), up RMB 50/mt ($7/mt) week on week, while the market prices in the northeastern region stand at RMB 800/mt ($111/mt, damp base/tax excluded), up RMB 50/mt ($7/mt) week on week. Meanwhile, the prices of 63.5 percent Indian fine ore are at $120/mt FOB, while the CFR price (Tianjin Port) is at $139/mt, up $6/mt compared with a week ago. In addition, mainstream quotations of 63.5 percent Indian ore are at RMB 1,120/mt ($165/mt) at Chinese ports, up RMB 80/mt ($12/mt) week on week. Meanwhile, the deal price of 62.5 percent Australian PB fines is at RMB 1,110/mt ($164/mt), up RMB 50/mt ($7/mt) from the previous week, with the market price of 65 percent Brazilian fine ore at RMB 1,160/mt ($171/mt), up RMB 40/mt ($6/mt) week on week.

Although China's iron ore market has continued its upward trend, the market has observed a slowdown in transactions due to the fluctuating state of the domestic steel market. Due to high inventories and oversupply in the Chinese steel market, most steel market players believe that steel prices may see further declines. Looking at the current situation, given the increased inventories of imported iron ore at the Chinese ports, some iron ore traders express the view that the room for further upward movement of iron ore prices is limited.

Another reason for the increase in iron ore prices is the influence of the measure implemented by the government of the Indian state of Karnataka, banning iron ore exports from ten ports, effective as of July 26. India is an important iron ore supplier for the Chinese spot market, and so this measure looks likely to influence Chinese iron ore imports.