Having increased by $0.37/mt last week amid fluctuations, prices of ex-Australia iron ore of 62 percent Fe content for delivery to China’s Qingdao port have moved sideways as of today, Monday, October 1, as compared to the closing price at the end of last week, starting the current week at $68.60-69.37/mt CFR China against the backdrop of the week-long nationwide holiday in China.
Trading activity at Chinese ports increased before the national holiday in China (October 1-7), while buyers restocked raw material in this period. As a result of the deals concluded, iron ore prices started to move up as of the middle of last week. Since there will be approximately one month after the national holiday until the winter production cuts, steel demand and production in China is expected to increase in this period of time. Following the holiday, market players think that demand for mid-grade iron ore will remain strong, while no decrease in Chinese demand for Australian iron ore is expected as production cuts in China will not be as strict as they were last year.
Additionally, Fortescue Metals Group has announced that it will start shipments of West Pilbara fines as of December to meet China’s demand for iron ore. The expected specifications of the Western Pilbara fines are 60.1 percent Fe, 2.3-2.5 percent alumina, 4.3-4.5 percent silica and 0.08-0.09 percent phosphorus.
On the other hand, the US and China imposed duties on each other on Monday, September 24, again highlighting the risk of a global trade war and that trade tensions will not end in the short term. To eliminate the effects of the additional duties targeting all China’s foreign trade, particularly its steel exports, as well as posing a risk of a slowdown in China’s economic growth, the Chinese government is reportedly planning to keep domestic steel demand at strong levels by means of infrastructure spending.
Additionally, SteelOrbis has been informed that China will open its iron ore option exchanges to global players in 2019 to provide more hedging alternatives to iron ore and steel producers. By this move, China is planning to attract more investors to its iron ore futures markets by providing a shield from price fluctuations, while this decision will also reduce the impact of the actions of speculative buyers on the iron ore futures markets.