China’s iron ore prices still rise but decline may be around the corner

Friday, 25 September 2009 11:24:46 (GMT+3)   |  
       

China's domestic iron ore market again moved up in the past week, but saw flat levels of commercial activity due to the continuing sluggishness of the finished steel market. If China's steel market continues its bearish performance, it will be quite hard for iron ore prices to maintain their positive trend.

Product name

Specification

Average price

(RMB/mt)

Price  ($/mt)

Weekly change (RMB/mt)

Iron ore concentrate

damp base (iron content: 66 percent)

600

87

30

India fine ore

63.5 percent

730

107

50

The international shipping freight market posted a considerable drop during the past week. On September 23, the Baltic Dry Index (BDI) closed at 2,175 points, down 240 points compared with the level on September 16. On September 23, the average freight charge from Brazil to Beilun Port in China was $21.13/mt, down by $4.6/mt week on week. Meanwhile, the average freight rate from Western Australia to Beilun on September 23 was $7.06/mt, a slip of $2.4/mt week on week.

At present, the price of 66 percent damp base iron ore in Tangshan, Hebei Province is at the level of RMB 600/mt ($88/mt, tax excluded), while the market prices in the northeastern regions stand at RMB 500/mt ($73/mt, damp base/tax excluded), both up by RMB 10-30/mt ($1.5-3/mt) week on week. Meanwhile, the prices of 63.5 percent Indian fine ore have jumped up by $10/mt to $75/mt FOB, while the CFR price (Tianjin Port) has gone up by $6-10/mt week on week to $88-93/mt. Additionally, the price quotation of 63.5 percent Indian ore has jumped up by RMB 50/mt ($7/mt) week on week and is now at RMB 730/mt ($107/mt) at Chinese ports, while the deal price of 62.5 percent Australian PB fines has risen by RMB 40/mt ($6/mt) to RMB 730/mt ($107/mt), with the market price of 65 percent Brazilian fine ore up by RMB 30/mt ($4/mt) to RMB 750/mt ($110/mt).

Iron ore prices in the Chinese domestic market continued their climbing trend during the past week despite the overall slackness of commercial activity. The rising movement of iron ore prices seems quite strange against the background of the slumped finished steel prices. It is mainly due to the speculation of large-scale domestic iron ore traders and the price increases of overseas mines that the Chinese iron ore market has continued to rise in recent days. In the previous week, some local large-scale iron ore traders like Sinosteel announced they were raising their prices of 63.5 percent Indian fine ore to RMB 730/mt ($107/mt) - an example which was followed by other domestic iron ore traders. As a result, average market prices reached the abovementioned level during the past week. Meanwhile, with miners in Brazil and Australia having considerably reduced their spot ore shipments to China, Chinese traders have increased their inquiries to Indian iron ore suppliers, resulting in sharp hikes in quotations of Indian ore. At present, the CFR price of 63.5 percent Indian fine ore to China has reached $93/mt, as reported by market players. However, there have been few takers in the domestic market and local mills have not expressed any interest in purchasing iron ore at high prices, thus resulting in the sluggish trading performance of recent days. Currently, with hot rolled prices in Shanghai almost down to the level of RMB 3,300/mt ($484/mt) following the continuous slump in steel prices, the Chinese iron ore market will very likely enter a declining trend in the coming period.


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