Over the past week China's domestic iron ore market has generally remained stable on a weak trend. Due to the continuing sluggishness in the domestic finished steel market and the shrinking profit margin available for steel products, most Chinese mills have reduced their purchases of iron ore given the relatively high price levels involved. Despite the rally seen in shipping freight charges, iron ore prices in China will still face great downward pressure if the finished steel market fails to get rid of its current softness.
Product name | Specification | Average price (RMB/mt) | Price ($/mt) | Weekly change (RMB/mt) |
Iron ore concentrate | damp base (iron content: 66 percent) | 600 | 87 | - |
India fine ore | 63.5 percent | 720 | 106 | -10 |
The international shipping freight market has posted a considerable rise in recent days. On October 15, the Baltic Dry Index (BDI) closed at 2,688 points, up 471 points compared with the level on September 23. On October 15, the average freight charge from Brazil to Beilun Port in China was $26.88/mt, up by $5.75/mt compared with the levels on September 23. Meanwhile, the average freight rate from Western Australia to Beilun on October 15 was $11.1/mt, an increase of of $4.04/mt.
Domestic ore prices in the Chinese market have generally remained stable throughout the past week, with a minor decline observed in prices of imported ore. 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). Meanwhile, the prices of 63.5 percent Indian fine ore have declined to $73/mt FOB, while the CFR price (Tianjin Port) is at $88/mt. Additionally, the price quotation of 63.5 percent Indian ore has slid by RMB 10/mt ($1/mt) week on week and is now at RMB 720/mt ($106/mt) at Chinese ports, while the deal price of 62.5 percent Australian PB fines is down by RMB 20/mt ($3/mt) to RMB 710/mt ($104/mt), with the market price of 65 percent Brazilian fine ore standing at RMB 750/mt ($110/mt).
Retaining an overall weak trading performance, the iron ore market in China has seen a slight slip in both spot ore prices and import quotations in recent days. Meanwhile, most Chinese mills and traders have recently concluded only limited deals of imported ore due to concerns over the significant risks entailed by high-priced materials. As a result, new arrivals at the Chinese ports in November are likely to register a decline. In addition, a certain relaxation has also been recorded in the trading of spot ore materials against the background of the generally stable movement of the market.
In spite of the continuous decline in local finished steel prices, most domestic mills are still able to maintain their production operations, making production halts unlikely in the month of October. On the whole, Chinese mills have recently been making only small purchases of iron ore in order to meet their needs, without holding high inventories in hand.
According to the latest statistics, China's iron ore imports in September totaled 64.55 million mt, marking a record monthly high, up by 64.67 percent year on year. From January to September, total imports amounted to 469.36 million mt, up 35.7 percent year on year. The import volume figures indicate that iron ore demand in China still remains at a relatively high level. All in all, given the high output of crude steel, China's steel market will still face significant downward pressure in the near future, and this is expected to have a knock-on effect on iron ore prices.