Spot iron ore prices in China have dropped by five percent today, August 18, coming to below $150/mt CFR, which was seen the last time in early February or more than half a year ago. The latest fall in futures prices, which are reflect sentiment in the market and the negative outlook due to production cuts at mills, has put pressure on spot prices.
The price for iron ore fines with 62 percent Fe content has fallen by $8.3/mt today to $149.9/mt CFR. The previous time a price below $150/mt CFR was reported by SteelOrbis was on February 2. Ex-Brazil 65 percent Fe content iron ore has come down to $180.8/mt CFR, dropping by $7.55/mt from yesterday.
Four deals have been reported today at trading platforms, confirming much lower prices. One was a contract for 110,000 mt of Newman fines with 62.3 percent Fe at $154.5/mt CFR. Also, 170,000 mt of BRBF fines with 62 percent Fe and low alumina were traded at the September index + $0.9/mt. A transaction for 80,000 mt of Australian Yandi fines was done at the October index - $18.5/mt. 90,000 mt of Jimblebar iron ore fines were sold at the October index - $12.5/mt.
The expected worsening of the demand-supply balance has been among the main reasons behind the recent price drop. In particular, iron ore consumption is not expected to increase by the end of the year even despite the construction season starting in autumn, as crude steel production restrictions will be in place ahead of the Winter Olympics in Hebei and the overall target to keep national steel output at not higher than the 2020 level. At the same time, supply of iron ore is expected to be stable or even increase gradually.
“Conditions have been particularly tight since the second half of the 2020 calendar year, with new record highs for 62 percent Fe index fines and lump premium established… In the medium term, China’s demand for iron ore is expected to be lower than it is today as crude steel production plateaus and the scrap-to-steel ratio rises,” BHP Billiton, one of the major iron ore suppliers to China said in its latest statement.
Iron ore futures at Dalian Commodities Exchange have closed at RMB 813/mt ($125/mt) or 2.5 percent lower than a day earlier, signalling a worsening of sentiments.
In addition, weak demand and prices for steel products in China have been depressing the iron ore market. Rebar futures have fallen sharply by RMB 198/mt ($30.5/mt) today, closing at RMB 5,144/mt ($792/mt).
$1 = RMB 6.4915