Iron ore price in China slowly heads north, dispute with BHP seems to have ended

Iron ore prices in China have moved up over the past week, coming closer to the $110/mt CFR mark again, mainly supported by the increase in futures prices, better sentiments and a further hike in the costs of miners amid the shortage of fuel seen in Australia. At the same time, this week has seen an important milestone reached between China and BHP, with their long-term agreement appearing to have been nearly finalized and with China starting to lift its ban on BHP’s fines.

Iron ore with 62 percent Fe content stands at $108.6/mt CFR on April 16, adding $1.3/mt from the previous day and up $2.65/mt over the past week. Fines with 65 percent Fe content have been priced at $125/mt CFR, up by $1.45/mt from the previous day, while up $2.4/mt week on week.

23 deals totaling 203,500 mt of iron ore have been signed at the Corex platform on April 16. In particular, 16,000 mt of 61.08 percent Fe Mac fines reached RMB 775/mt ($113/mt), for delivery at Tianjin port, while 10,000 mt of 60.72 percent Fe fines were transacted at RMB 782/mt ($114/mt), for delivery at Jingtang port.

On April 16, Corex’s Iron Ore Portside Index (61% Fe Qingdao) and Iron Ore Portside Index (61% Fe Caofeidian) were at RMB 774/wmt and RMB 781/wmt, respectively, with the USD/dmt equivalents standing at $105.7 and $106.0.

During the given week, import iron ore prices have moved on an upward trend amid increasing iron ore futures, reflecting rather bullish sentiments. Meanwhile, reports of an oil shortage in Australia have bolstered iron ore prices, even amid increasing shipments of iron ore. Australia is facing a historic energy crisis due to the war in the Middle East, with most oil being imported into the country (up to 80 percent). Moreover, on the night of April 15, a fire broke out at a crucial Australian refinery - Viva Energy’s Geelong refinery. This plant produces about 10 percent of Australia’s oil.

In addition, BHP's negotiations with China Mineral Resources Group (CMRG) have been finalized, removing adverse effects, which has exerted a positive impact on the iron ore market in general. This happened after a meeting of Baowu Steel Group's chairman with BHP’s current CEO Mike Henry and the miner’s incoming CEO Brandon Craig in Shanghai. There are no details on the conditions reached in the long-term agreement, but there are market reports that the big Chinese mills have already received a notice from CMRG that they can partially (or fully in the near future) resume deliveries of the earlier banned BHP fines. Jimblebar and Jinbao ⁠fines produced by BHP were banned from November last year, while Newman fines were banned from March this year.

However, demand for steel in China has not been as good as market players had expected, while supply of iron ore might increase in the longer term, which will weaken the support for prices.

Since the Labor Day holiday (May 1-5) is approaching, there may be restocking of inventories, which would positively affect iron ore prices. It is thought that iron ore prices in the Chinese market will fluctuate within a limited range at high levels, or edge up further in the coming week.

Iron ore futures prices at Dalian Commodity Exchange have increased by 3.1 percent today to RMB 782.5/mt ($114.1/mt) compared to the previous trading day, April 15, while rising by 4.3 percent compared to April 9.

As of April 16, rebar futures at Shanghai Futures Exchange are standing at RMB 3,133/mt ($457/mt), increasing by RMB 37/mt ($5.4/mt) or 1.2 percent since April 9, while up 1.06 percent compared to the previous trading day, April 15.

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 6.8616