Iron ore price down further as steel supply-demand situation still far from balanced

Iron ore prices with 65 percent Fe content have edged down again today, February 27, following declining futures prices, high steel inventories and possible deeper steel production cuts if demand does not fully improve in March. Fines with 62 percent Fe content have declined by $1.7/mt today to $85.6/mt CFR, while Brazilian iron ore with 65 percent Fe has lost $2.1/mt to $101/mt CFR on the same day, SteelOrbis has learned.

70,000 mt of 62.5 percent Fe Pilbara lump ore has been sold at the April index with $0.4/mt extra. Another deal for 100,000 mt of 62 percent Fe Pilbara fines has been transacted at the April index plus $1.3/mt for delivery during April. About 90,000 mt of Yandi fines with about 58 percent Fe have been sold based on the April index with a $3.5/mt discount. A parcel of 5,000 mt of 56.56 percent Fe FMG fines has been traded at RMB 530/mt ($75.5/mt).

During the given week, blast furnaces which reduced production due to the coronavirus have not resumed production yet, while no more blast furnaces were required to halt production. Following quick rises seen in previous week, Chinese steelmakers have been unwilling to accept further rises in iron ore prices, and thereby some iron ore traders under pressure from high inventory levels have chosen to seek transactions at lower prices. Moreover, steel mills’ inventories have been growing fast. According to the report from the CISA on February 25, as of February 20 this year overall domestic inventories of the five main finished steel products in 20 cities in China totaled 17.35 million mt, up 2.64 million mt or 17.9 percent from February 10 and rising by 9.23 million mt or 113.7 percent month on month.

Outbreaks of the coronavirus have been seen in more countries, arousing market players’ concerns for the future prospects for the steel market and resulting in declining trends in ferrous metal futures prices over the past two trading days. However, China’s measures to stimulate construction activities will take effect and bolster steel market in March, which will boost the demand for iron ore, sources believe.

Iron ore futures prices at Dalian Commodity Exchange have lost RMB 23.5/mt ($3.3/mt) or 3.58 percent today, coming to RMB 633/mt ($90.2/mt) compared to February 26, while down 5.1 percent compared to February 20.

Jiangsu Province-based Shagang Group, China’s largest private steelmaker has cut its offer prices for rebar, high-speed wire rod and bar-in-coil by RMB 230/mt ($32.8/mt), RMB 200/mt ($28.5/mt) and RMB 200/mt ($28.5/mt) for March 1-10 period.

Rebar futures at Shanghai Future Exchange have decreased by RMB 41/mt ($5.8/mt) or 1.2 percent on Thursday since February 20 and are down 1.3 percent compared to the previous trading day.  

Imported iron ore prices in China (week-on-week basis)

Price Includes VAT.  

Nationwide iron ore concentrate prices (66 percent Fe)

Price Includes VAT. 

$1 = RMB 7.0215