Key drivers
The value of the most-traded September iron ore futures contract on the Dalian Commodity Exchange (DCE) fell slightly on Wednesday, ending the day lower by 0.22% from Tuesday’s settlement price of 928.50 yuan ($139.20) per tonne.
This was reflected in the forward-month swaps contracts on the Singapore Exchange (SGX), which was also largely stable on Wednesday. By 6:02 pm Singapore time, the most-traded July contract was up by $0.14 per tonne compared with the previous settlement price of $144.61 per tonne.
Spot physical demand remained stable, with steelmakers looking for low- and mid-grade iron ore fines amid thin steelmaking margins.
Fastmarkets data shows that Chinese steel mills’ profits shrank to the lowest in more than a year in May due to prolonged Covid-19 lockdowns dampening spot demand and causing pervasive weak market sentiment. Eastern China hot-rolled and rebar prices were at their lowest in six and three months respectively in May.
Flat steel producers also saw their margin proxies dropping to a 15-month low of 117.15 yuan per tonne in May, especially impacted by the lockdown of the financial and manufacturing hub of Shanghai.
Steelmakers do not expect to see stronger downstream steel markets in the near term, and do not expect margins to improve significantly.
“It’s hard to say what will happen in July and August now, but the sentiment isn’t that strong for forward months,” a buyer source in Guangxi told Fastmarkets on Wednesday.
Market sources said the narrowing of the 62% Fe-65% Fe price spread in both the physical seaborne and derivatives markets pointed to the growing demand for mid-grade fines and weaker demand for high-grade fines in the current buying environment.
“There is hardly any trade for Brazilian high-grade fines now, because they are more costly, and there is increasing domestic iron ore concentrates supply which can replace them in the blend ratios,” a buyer source in Shanxi said.
A trader source in Shandong said market sentiment paled in contrast with the previous week as downstream demand continued to remain sluggish after the Dragon Boat Festival long weekend.
“Buying ideas for cargoes in the seaborne market has been particularly weak due to the high prices on forward-month swap contracts. This has seen premiums for Pilbara Blend fines with July laycans become lower than the previous week,” the Shandong trader told Fastmarkets.
Fastmarkets iron ore indices
62% Fe fines, cfr Qingdao: $145.84 per tonne, down $0.46 per tonne
62% Fe low-alumina fines, cfr Qingdao: $150.09 per tonne, down $0.26 per tonne
58% Fe fines high-grade premium, cfr Qingdao: $137.97 per tonne, down $0.08 per tonne
65% Fe Brazil-origin fines, cfr Qingdao: $167.80 per tonne, down $2.00 per tonne
63% Fe Australia-origin lump ore premium, cfr Qingdao: $0.2650 per dry metric tonne unit (dmtu), down $0.0550 per dmtu
62% Fe fines, fot Qingdao: 1,027 yuan per wet metric tonne (implied 62% Fe China Port Price: $143.20 per dry tonne), unchanged
The increase in availability of iron ore lump in the market has softened the pressure on lump prices. Lump premiums are expected to start winding down after hike seen at the end of May
Trades/Offers/Bids heard in the market
BHP, tender, 183,915 tonnes of 58.89% Fe Jingbao fines, traded at the June average of two 62% Fe indices plus a discount of $12.50 per tonne, laycan June 1-10.
BHP, tender, 173,854 tonnes of unscreened 63.02% Fe Newman Blend lump traded at the June average of a 62% Fe index plus a discount of $3.50 per tonne, laycan June 3-12.
BHP, Beijing Iron Ore Trading Center, 90,000 tonnes of 62.3% Fe Newman fines, offered at $148.05 per tonne cfr China, laycan July 1-10.
Vale, tender, 170,000 tonnes of 57.09% Fe Sinter Feed High Silica Guaiba, bill of lading dated June 2.
Spot market, 110,000 tonnes of 65% Fe Iron Ore Carajas fines, traded at the July average of Fastmarkets’ index for iron ore 65% Fe Brazil-origin fines, cfr China, plus a premium of $3.40 per tonne, bill of lading dated May 31.
Market participants’ indications
Fastmarkets’ index for iron ore 62% Fe fines
Pilbara Blend fines: $143.31-147.50 per tonne cfr Qingdao
Brazilian Blend fines: $145.00-151.97 per tonne cfr Qingdao
Newman fines: $145.30-147.06 per tonne cfr Qingdao
Mac fines: $141.81-143.78 per tonne cfr Qingdao
Jimblebar fines: $128.10-137.83 per tonne cfr Qingdao
Fastmarkets’ index for iron ore 65% Fe Brazil-origin fines
Iron Ore Carajas: $167.00-170.00 per tonne cfr Qingdao
Port prices
Pilbara Blend fines were traded at 985-1,000 yuan per wmt in Shandong Province, Tianjin city and Tangshan city on Wednesday, compared with 985-1,010 yuan per wmt on Tuesday.
The latest range is equivalent to about $137-139 per tonne in the seaborne market.
Dalian Commodity Exchange
The most-traded September iron ore futures contract closed at 926.50 yuan per tonne on Wednesday, down by 2 yuan per tonne from yesterday’s closing price.
Alex Theo and Norman Fong in Singapore contributed to this article.
