Chinese iron ore market maintains uptrend

Friday, 17 July 2009 11:56:05 (GMT+3)   |  
       

Market prices of both domestic ore and imported ore in China have continued to post a rise during the past week. The tight availability of spot ore supplies at the ports is the main factor behind the continuous rise in iron ore prices.

Product name

Specification

Average price(RMB/mt)

Price  ($/mt)

Weekly change (RMB/mt)

Iron ore concentrate

damp base (iron content: 66 percent)

590

86

-

India fine ore

63.5 percent

680

100

20

The international shipping freight market soared strongly during the past week, with a rebound also observed in the Baltic Dry Index (BDI) index. On July 17, the BDI closed at 3,324 points, up 306 points compared with the level one week earlier on July 10. On July 16, the average freight charge from Brazil to Beilun Port in China was $40.46/mt, up by $7.9/mt week on week. Meanwhile, the average freight rate from Western Australia to Beilun on July 16 was $15.34/mt, up $1.63/mt week on week. In addition, the freight cost of Indian ore to China's major ports on July 16 was at $18.46/mt, a slight leap of $1.35/mt compared with the level on July 9.

Over the past week iron ore prices in China's domestic market have continued their rising trend. At present, the price of 66 percent damp base iron ore in Tangshan, Hebei Province is in the range of RMB 590-600/mt ($86-88/mt, tax excluded), while the market prices in the northeastern regions stand at RMB 510-520/mt ($74-76/mt, damp base/tax excluded). Meanwhile, the prices of 63.5 percent Indian fine ore are at $69/mt FOB, while the CIF price (Tianjin Port) has risn by $3/mt week on week to $89/mt. Additionally, the price quotation of 63.5 percent Indian ore has increased by RMB 20/mt ($3/mt) week on week and is now at RMB 680/mt ($100/mt) at Chinese ports, while the deal price of 62.5 percent Australian PB fines has risen RMB 40/mt ($6/mt) to RMB 680/mt ($100/mt), with the market price of 65 percent Brazilian fine ore up by RMB 10/mt ($1/mt) to RMB 730/mt ($107/mt).

According to the customs statistics, China's iron ore imports in June totaled 55.29 million mt, up 29.3 percent year on year. From January to June, total iron ore imports amounted to 297 million mt, equivalent to more than 67 percent of the total iron ore imports last year.

Affected by China's detention of staff members from Rio Tinto's Shanghai office, both domestic mills and traders in China have appeared hesitant as regards purchasing and selling activities in recent days. It is also heard that the China Iron and Steel Association (CISA) and the Ministry of Commerce are now conducting investigations of large scale iron ore traders. Meanwhile, despite the relatively high inventory levels of iron ore at the ports, most stocks are for contract ore booked by various mills, while traders prefer to hold on to their materials, thus leading to the continuing tightness of spot ore supplies at the ports. Nevertheless, mills have begun to show some signs of a slowdown in their sourcing activities. With sufficient inventories and mass arrivals seen at the ports, many mills are reducing their purchase volumes in order to avoid potential risks.

As stated by the CISA, the negotiations between the Chinese mills and the international ore giants are still ongoing, but no result has been achieved yet. Australian miner BHP Billiton has also stated that the talks still continuing. It is heard that some large and medium-scale mills in China have started to book iron ore from overseas miners at the levels of the 2008 contract prices with a 33 percent discount.


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