With the Chinese steel market trending downward due to the recently announced export rebate policy, the decreased demand from steel mills has caused a significant drop in the prices of both domestic and imported iron ore. Currently, the spot price of iron ore is far below the contract price for Q3.
Product name | Specification | Average price (RMB/mt) | Price ($/mt) | Weekly change (RMB/mt) |
Iron concentrate | damp base (iron content: 66 percent) | 780 | 115 | -70 |
India fine ore | 63.5 percent | 1,090 | 161 | -40 |
On July 1, the Baltic Dry Index (BDI) closed at 2,351 points, down 151 points compared with last week. On the same day, the average freight charge from Brazil to Beilun port in China was $21.89/mt, up slightly by $0.66/mt week on week. Meanwhile, the average freight rate from Western Australia to Beilun on the same date was $8.41/mt, down by $0.41/mt compared with June 24.
During the week in question, the Chinese domestic iron ore market generally trended in a downward direction. At present, the price of 66 percent damp base iron ore in Tangshan, Hebei Province is at the level of RMB 850/mt ($110/mt, tax excluded), down RMB 20/mt ($3/mt) week on week, while the market prices in the northeastern region stand at RMB 750/mt ($110/mt, damp base/tax excluded), down RMB 10/mt ($1/mt) week on week. Meanwhile, the prices of 63.5 percent Indian fine ore remain at $124/mt FOB, unchanged week on week, while the CFR price (Tianjin Port) is at $149/mt, down $2/mt compared with a week ago. In addition, mainstream quotations of 63.5 percent Indian ore have remained at RMB 1,130-1,150/mt ($166-169/mt) at Chinese ports, with some lower-end prices declining to RMB 1,100/mt ($162/mt); meanwhile, the deal price of 62.5 percent Australian PB fines is at RMB 1,140/mt ($168/mt), with the market price of 65 percent Brazilian fine ore at RMB 1,180/mt ($173/mt), both down RMB 20/mt week on week.
China's iron ore market has been affected greatly by the Chinese government's recent announcement of the cancellation of the export rebate on certain steel products. The sluggishness in the steel market has caused a slowdown in transactions in the iron ore market. Since the steel market is unlikely to turn around in the short term, it is thought that the iron ore market will continue to trend downward in the coming period. With the continuous decline observed in the spot iron ore market, the current price of Indian iron ore has declined to $142/mt CFR, far below the contract price for Q3. Based on the current market situation, because the agreements reached between most Chinese mills and the iron ore giants are verbal ones, it is likely that the contract price will be abolished in the coming period.