IRON ORE DAILY: Prices down on news of monitoring, new restrictions

Iron ore prices went down slightly on Friday June 18 on news of state monitoring of the commodities markets, new operational restrictions in Tangshan and market rumors about capacity reductions.

Fastmarkets iron ore indices
62% Fe fines, cfr Qingdao: $218.90 per tonne, down by $1.92 per tonne
62% Fe low-alumina fines, cfr Qingdao: $220.24 per tonne, down by $1.77 per tonne
58% Fe fines high-grade premium, cfr Qingdao: $186.30 per tonne, down by $2.18 per tonne
65% Fe Brazil-origin fines, cfr Qingdao: $249.40 per tonne, down by $2.10 per tonne
62% Fe fines, fot Qingdao: 1,524 yuan per wet metric tonne (implied 62% Fe China Port Price: $222.28 per dry tonne), up by 10 yuan per wmt.

Key drivers
The price of the most-traded September iron ore futures contract on the Dalian Commodity Exchange (DCE) fluctuated in the morning then fell near the closing time in the afternoon, ending the day down by 1.7% from Thursday’s closing price of 1,223.50 yuan ($190) per tonne.

The most-traded July iron ore forward-month swap contract on the Singapore Exchange (SGX) fell. By 6:34pm Singapore time, it showed a decrease of $2.22 per tonne compared with Thursday’s settlement price of $209.12 per tonne.

On June 17, the Pricing Department of China’s National Development and Reform Commission (NDRC) met with the Bureau for Price Supervision and Anti-Unfair Competition of State Administration for Market Regulation, to discuss the surging prices for commodities such as coal. According to an NDRC statement on Friday, such commodity prices will be tracked and market order will be maintained.

A trading source said that this news had depressed market sentiment, causing the fall in the iron ore futures price on the DCE on Friday afternoon. “But physical cargoes still follow the demand and supply fundamentals,” he said.

Sources told Fastmarkets on Friday that Tangshan city has started another round of temporary environmental restrictions. These will be imposed between 5pm on June 18 and 8pm on June 22. During this period, steel mills’ sintering machines should be halted from 10pm until 9am the next day.

A steel mill source in Tangshan city said that mills there had become accustomed to such restrictions.

“In terms of iron ore brands, restrictions would support lump and pellet. But this round of restrictions can’t give new support to the already strongly performing lump and pellet prices,” the source said. “Also, high-grade fines will be favored compared with low- and mid-grade fines.”

The source added that liquidity in Super Special Fines and Jimblebar fines increased recently due to their price advantage.

Market chatter suggested that the Chinese government would look into the progress of capacity reductions in the steel industry since 2016, and into steel mills’ plans for crude steel production cuts this year, while nine inspection teams would be sent out to investigate sites from June 15 to July 31, according to a trading source in Singapore. The source added that such inspections could depress sentiment in the iron ore markets.

Because of the increasing premium for Pilbara blend fines, two trading sources said that traders needed to buy cargoes of such fines so that they could deliver them to clients.

A trader source in Shandong province said that the volumes of Pilbara blend fines and Iron Ore Carajas fines currently in Chinese ports were relatively small.

Quote of the day
“With prices for iron ore being so volatile, it has been difficult for buyers to make commitments on cargoes. Most have preferred to wait and [watch developments], and some have turned to the Chinese ports instead of seaborne cargoes, but these buyers were only buying on an as-needed basis. The price volatility has definitely affected the liquidity in the seaborne iron ore market,” a Shanghai-based analyst said.

Trades/offers/bids heard in the market
Rio Tinto, Globalore, 170,000 tonnes of 62% Fe Pilbara Blend fines, traded at the July average of a 62% Fe index plus a premium of $12 per tonne, laycan July 11-20.

BHP, Globalore, 90,000 tonnes of 62.5% Fe Newman Blend lump, traded at the July average of a 62% Fe index on an fob Australia basis, plus a lump premium of $0.7300 dry metric tonne unit, laycan July 11-20.

Vale, tender, 100,000 tonnes of 56.84% Fe Sinter Fines Guaiba, bill of lading dated June 12.

Vale, tender, 90,000 tonnes of 64.72% Fe Iron Ore Carajas fines, bill of lading dated June 15.

Market participants’ indications for:
Fastmarkets index for iron ore 62% Fe fines
Pilbara Blend fines: $215.00-221.00 per tonne cfr China
Brazilian Blend fines: $218.20-223.00 per tonne cfr China
Newman fines: $214.10-218.40 per tonne cfr China

Fastmarkets index for iron ore 65% Fe Brazil-origin fines
Iron Ore Carajas fines: $247.50-250.20 per tonne cfr China

Port prices
Pilbara Blend fines were traded at 1,495-1,517 yuan per wmt in Tangshan and Tianjin city on Friday, compared with 1,488-1,505 yuan per wmt on Thursday.

The latest range was equivalent to about $218-221 per tonne in the seaborne market.

Dalian Commodity Exchange
The most-traded September iron ore futures contract closed at 1,203 yuan ($187) per tonne on Friday, down by 20.50 yuan per tonne from Thursday’s close.

Alex Theo and Zihao Yu in Singapore contributed to this article.

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