Iron ore up first this week amid supply concerns, while down later with no fundamentals change

Iron ore prices in China have continued to fluctuate within a limited range in the past week. On Tuesday, prices reached the highest level since late February amid talks about postponement in new volumes expected to come to the market by the end of the year and overall supply concerns. But this has quickly changed by the retreat later this week as weak demand for steel is still the major factor in the market.

On September 11, prices for ex-Australia iron ore fines with 62 percent Fe content are at $104.6/mt CFR, decreasing by $1.45/mt from the previous day, while increasing by $0.45/mt over the past week. Also, ex-Brazil fines with 65 percent Fe are priced at $122.1/mt CFR, down $1.6/mt from the previous day, and down $0.65/mt over the week.

22 deals totaling 249,700 mt of iron ore have been signed at the Corex platform on September 11. In particular, 12,196 mt of 63.31 percent Fe fines were sold at RMB 797/mt ($112.3/mt) ex-port, 15,000 mt of 64.8 percent Fe Carajas fines were transacted at RMB 940/mt ($132.4/mt) Caofeidian port. Three other deals were done from Tianjin port: Two contracts for PB fines were done at RMB 802/mt ($113/mt) and RMB 750/mt ($105.6/mt), and 11,160 mt of IOC6 dealt at RMB 813/mt ($114.5/mt). 

Iron ore prices reached the highest level on Tuesday, September 9 after news that the Guinean government asked Rio Tinto and Baowu to establish local processing plants for the Simandou iron ore project instead of the previously planned fully export-oriented iron ore plan. This will potentially postpone the start-up of the 120 million mt per annum project previously expected to start operations late this year. Also, it will entail additional investment expenses. Also, the delivery of iron ore from the major sellers in the global market is expected to decrease from October, which will bolster its prices to a certain degree. Meanwhile, the molten iron output may see rises amid the cooler weather in the traditional peak season, which will provide certain support to the iron ore prices.

Nevertheless, from Wednesday, iron ore prices have come back to the negative trajectory as finished steel prices edged down, resulting in decreasing profitability on steelmakers’ side, negatively affecting the iron ore market. Rising steel inventories have been indicative of still weak demand in the market and in such conditions mills in China will target lower or at least stable raw materials prices.

Iron ore futures prices at Dalian Commodity Exchange have decreased by 0.81 percent today to RMB 795.5/mt ($112/mt) compared to the previous trading day, September 10, while increasing by 0.5 percent compared to September 4.

As of September 11, rebar futures at Shanghai Futures Exchange are standing at RMB 3,092/mt ($435.5/mt), decreasing by RMB 25/mt ($3.5/mt) or 0.8 percent since September 4, while down 0.51 percent compared to the previous trading day, September 10.

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 7.1034