Indian export offers for high grade iron ore fines (with Fe content of 63.5 percent and higher) have continued to gain momentum for the second consecutive week and surged by $6.60/mt week on week to $112.15/mt CFR China, as the market perceived the supply tightness will be sustained over the medium term combined with lower availability from local mines as monsoon rains start to spread across the country, traders said on Friday, June 21.
Accordingly, Indian iron ore fines export offers have gained approximately $16/mt over the past two consecutive weeks amid sustained high-volume contracts concluded by traders representing Chinese steel mills.
“The market is veering round to accept that global supplies will remain tight and will continue to push prices upwards. Reports indicating that mines of global major Vale will be brought back into production have not had any depressing impact as these have been negated by reports of Rio Tinto forecasting production cuts,” an Odisha-based miner-exporter said.
“In the local market, most mines are expected to be forced to lower production as monsoon rains are starting to spread across the country. This is expected to bring down total exportable volumes. Also, aggregating traders’ volumes available at port stockyards will face a drawdown during the coming rainy months and these factors will continue to support offer levels,” the miner-exporter added.
According to two other traders, the market correction surfaced for only a few trading days and, with offers now having clearly breached the $100/mt mark, buyers are concluding higher-volume bookings, perceiving very limited downside risks and offers are unlikely to fall below the $100/mt mark in the short term.
The two traders state that, with availability of high grade low alumina-content shipments from leading global miners in Brazil and Australia expected to remain tight, demand for high alumina-content Indian iron ore fines has surged on the back of the sharp rise in booking volumes during the past week.
However, a steel sector analyst with a Mumbai-based financial advisory firm who holds a contrarian view said that the recent bull raw material market has been entirely supply-side driven and prices may still face significant downside risks from finished steel prices.
The analyst said that Chinese steel mills are reportedly facing pressures on margins from soft finished steel prices and this trend if sustained will have a collateral impact on their raw material restocking volumes and a resultant depressing impact on iron ore prices.