IRON ORE DAILY: Prices follow steel uptrend amid talk of easing curbs in Tangshan

Seaborne iron ore prices rose on Monday May 31 amid support from increasing billet prices in China over the weekend and a potential easing of restrictions on steelmaking in Tangshan.

Fastmarkets iron ore indices
62% Fe fines, cfr Qingdao: $198.83 per tonne, up $8.32 per tonne
62% Fe low-alumina fines, cfr Qingdao: $201.26 per tonne, up $8.59 per tonne
58% Fe fines high-grade premium, cfr Qingdao: $172.85 per tonne, up $10.05 per tonne
65% Fe Brazil-origin fines, cfr Qingdao: $232.80 per tonne, up $7.90 per tonne
62% Fe fines, fot Qingdao: 1,395 yuan per wet metric tonne (implied 62% Fe China Port Price: $205.18 per dry tonne), up by 81 yuan per wmt

Key drivers
The most-traded September iron ore futures contract on the Dalian Commodity Exchange (DCE) kept trending upward throughout the day before closing 4% higher than last Friday’s close of 1,063 yuan ($167) per tonne.

Similarly, the most-traded June iron ore forward-month swaps contract on the Singapore Exchange (SGX) gained strength during the day. By 6.06pm Singapore time, it had registered an increase of $9.89 per tonne compared with last Friday’s settlement price of $184.61 per tonne.

Sources told Fastmarkets that price increases for Chinese steel products over the weekend, particularly those for billet, gave support to iron ore prices on Monday.

After the price decreases in the iron ore market in the past two weeks, buyers made a return to the physical market to restock, which also contributed to the upward momentum, sources said.

They also said that there was talk in the market about a partial easing of restrictions on blast furnace operations in Tangshan, China’s steelmaking hub.

A buyer source in northern China said that while sintering restrictions would remain strict, five mills’ emissions reduction targets would be lowered to 30% from 50%, while those for another 15 steelmakers would have their eased to 20%.

While there is no official word on this so far, expectations of such an easing of restrictions might have contributed to the increase in iron ore prices on Monday, he said.

Tangshan’s environmental protection office had in March detailed measures to be imposed on mills, including requiring seven to cut production by 50% from March 20 until the end of June and 30% for the rest of the year, and another 16 to cut production from March 20 until December.

A trading source in Shanghai said the outlook for steel demand was still positive based on the latest manufacturing purchasing managers’ index (PMI) for China.

According to China’s National Bureau of Statistics, the country’s official manufacturing PMI fell slightly to 51.0 in May from 51.1 in April, which indicates that the sector continued to expand.

As a result of the improved sentiment, prices for both iron ore and steel strengthened on Monday compared with last week.

Quote of the day
“Another surge in iron ore futures on DCE and SGX today, which would likely pull up seaborne prices as well. As a result, a shift in buyer appetite toward low-grade iron ore fines could happen because of the higher prices for mid- and high-grade fines,” an analyst in Shanghai said.

Trades/offers/bids heard in the market
Rio Tinto, Beijing Iron Ore Trading Center (Corex), 170,000 tonnes of 62% Fe Pilbara Blend fines, traded at the July average of a 62% Fe index plus a premium of $8.70 per tonne, laycan June 27-July 6.

BHP, Corex, 80,000 tonnes of 57% Fe Yandi fines, traded at the July average of two 62% Fe indices plus a discount of $4.50 per tonne, July arrival.

Corex, 170,000 tonnes of 62% Fe Brazilian Blend fines, offered at $201.60 per tonne cfr China, laycan June 25-July 4.

Globalore, 170,000 tonnes of 65% Fe Iron Ore Carajas fines, bid made at $226 per tonne cfr China, bill of lading dated May 20-June 10.

Globalore, 70,000 tonnes of 62.5% Fe Pilbara Blend lump, bid made at the June average of a 62% Fe index plus a lump premium of $0.5700 per dry metric tonne unit, arrival no later than June 30.

Market participants’ indications for:
Fastmarkets index for iron ore 62% Fe fines
Pilbara Blend fines: $195.10-199.00 per tonne cfr China
Brazilian Blend fines: $195.60-203.00 per tonne cfr China
Newman fines: $195.10-198.00 per tonne cfr China
Mac fines: $190.20-190.20 per tonne cfr China
Jimblebar fines: $187.00-189.70 per tonne cfr China

Fastmarkets index for iron ore 65% Fe Brazil-origin fines
Iron Ore Carajas fines: $228.00-236.50 per tonne cfr China

Port prices
Pilbara Blend fines were traded at 1,355-1,390 yuan per wmt in Shandong province, Tangshan and Lianyungang city on Monday, compared with 1,300-1,340 yuan per wmt last Friday.

The latest range is equivalent to about $199-204 per tonne in the seaborne market.

Dalian Commodity Exchange
The most-traded September iron ore futures contract closed at 1,106 yuan per tonne on Monday, up by 43 yuan per tonne from last Friday’s close price of 1,063 yuan per tonne.

Alex Theo in Singapore contributed to this article.

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