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Iron ore prices are weakening fast, with offers at $100 per tonne for 63.5% Fe content fines now failing to find buyers as high inventories and falling Chinese steel prices damage sentiment.
The Metal Bulletin Iron Ore Index (MBIOI) fell again on Wednesday, shedding $1.24 to $93.89 per tonne cfr Qingdao on a 62% Fe basis, down from $95.13 on Tuesday.
The MBIOI has now tracked down progressively since hitting a high of $102.93 per tonne last week, first falling below $100 on Monday
“Market sentiment is very weak,” a trader in Shanghai told MB.
“Someone that is anxious to sell material in case of further declines is offering $100 per tonne for 63.5% grade Indian fines,” he said. “But even at $100, no buyer expressed interest. They want $95 per tonne.”
And prices could well fall further.
“Some traders are expecting offer prices to fall further in the immediate future, and some of the aggressive enquiries seen in the marketplace at the moment might start to look realistic over the next few days,” MBIOI director Cameron Hunt said.
“Although offer prices have dropped significantly, buyers have shown no anxiety to purchase material, and are waiting for prices to fall further,” he added.
The declines have come as steel prices dropped significantly, with Shanghai Futures Exchange rebar prices falling by 5% on Wednesday, the maximum amount they are permitted to fall in one day.
“In this downward trend, steel mills have no intention of building up or replenishing stocks,” an iron ore trader in Beijing said. “Additionally, iron ore stockpiles at steel mills can last until September or October.”
“It is difficult to find buyers at the moment,” a London-based trader said. “Iron ore buyers are getting more and more nervous with Chinese steel prices coming down and they expect iron ore prices to go down too.”
A great deal depends on domestic steel prices in China, and spot price movements could have a significant impact on outstanding annual contract negotiations.
“A major impetus to rising iron ore prices at the beginning of the month was the surge in steel prices, leaving mills scrambling for material and prepared to pay over the odds to get it,” Hunt continued.
“The recent sharp reversal in finished steel prices, and the expectation that they will fall further, will undermine both margins and confidence in the iron ore market, and inevitably lead to further corrections,” he said.
China announced on Monday that it had agreed with FMG, the world’s fourth-largest iron ore miner, on a 35.02% price cut for iron ore fines to 94 cents per dry metric tonne. This was a greater discount than the 33% cut Rio Tinto agreed with mills elsewhere in Asia.
But traders said the FMG settlement would probably have little significance, as the Australian miner accounts for too small a fraction of the market.