Iron ore prices rise despite weakness in futures market

Seaborne iron ore prices rebounded on Thursday December 23 after a slight dip on Wednesday, with market participants optimistic that there will be an uptick in demand from steel mills at the start of 2022.

Fastmarkets iron ore indices
62% Fe fines, cfr Qingdao: $126.35 per tonne, up $2.96 per tonne
62% Fe low-alumina fines, cfr Qingdao: $126.61 per tonne, up $2.44 per tonne
58% Fe fines high-grade premium, cfr Qingdao: $94.69 per tonne, down $2.02 per tonne
65% Fe Brazil-origin fines, cfr Qingdao: $143.20 per tonne, up $0.20 per tonne
63% Fe Australia-origin lump ore premium, cfr Qingdao: $0.1500 per dry metric tonne unit (dmtu), down $0.0150 per dmtu
62% Fe fines, fot Qingdao: 815 yuan per wet metric tonne (implied 62% Fe China Port Price: $118.07 per dry tonne), down by 3 yuan per wmt

Key drivers
The most-traded May iron ore futures contract on the Dalian Commodity Exchange edged down through the day on Thursday and ended down by 0.1% from Wednesday’s closing price of 693.50 yuan ($109) per tonne.

Iron ore forward-month swaps contracts on the Singapore Exchange, meanwhile, climbed and, by 6:04 pm Singapore time, the most-traded January contract was up by $0.82 per tonne compared with Wednesday’s settlement price of $125.72 per tonne.

A mill source from Tangshan said that a few steelmakers were still restocking seaborne iron ore cargoes ahead of the Chinese New Year festival, which starts on January 31 and runs through to February 6.

A some market participants said that procurement would continue to be focused on Chinese portside iron ore cargoes, where prices are lower because of the build-up in stocks at the ports, with mills also able to procure small volumes in a fluctuating market.

A trader source from north China said that, although there was a deal for Pilbara Blended fines on a trading platform on Thursday at a higher price than a deal done the day before, overall buying interest from Chinese steel mills remained weak.

Even so, the outlook for demand was given a lift by the widespread expectation of an increase in steel production in January because of improved margins, a northern China trading source said.

Some sources pointed to the fact that the latest 30% reduction in output in Hebei’s Handan city for the first quarter of 2022 was not as strict as the fourth-quarter cuts in 2021 and said they expect hot metal output to increase at the start of the year.

Quote of the day
“The iron ore futures on the DCE and the front-month swaps on the SGX were largely depressed by news of Covid-19 spreading from Shaanxi province. For now, the provincial government has implemented strict transport and movement restrictions to contain the spread of the virus, [even though] it is not known yet whether or not it will have a direct impact on the raw materials segment,” a Xiamen-based analyst said.

Trades/offers/bids heard in the market

Rio Tinto, Beijing Iron Ore Trading Center (Corex), 170,000 tonnes of 61% Fe Pilbara Blend fines, traded at $123 per tonne cfr China, laycan January 25-February 3.

Corex, 130,000 tonnes of 62.3% Fe Newman fines, offered at $123.55 per tonne cfr China, laycan January 16-25.

Corex, 160,000 tonnes of 58.2% Fe Fortescue Blend fines, offered at the February average of a 62% Fe index, with miner’s discount, plus a premium of $0.50 per tonne, laycan January 8-17.

Gloablore, 110,000 tonnes of 62.5% Fe Newman Blend lump, offered at the January average of a 62% Fe index on a fob Australia basis, plus a lump premium of $0.1500 per dry metric tonne unit, laycan January 16-25.

Vale, tender, 49.8% Fe Concentration Fines Tubarao, laycan December 23-January 1.

Vale, tender, 50,000 tonnes of 63.25% Fe Lump Ore Blast Furnace Carajas, bill of lading dated December 20.

Market participant indications
Fastmarkets index for iron ore 62% Fe fines
Brazilian Blend fines: $124-128 per tonne cfr China
Newman fines: $122.00-126.39 per tonne cfr China
Mac fines: $115.23-115.61 per tonne cfr China
Jimblebar fines: $100.81-106.58 per tonne cfr China

Fastmarkets index for iron ore 65% Fe Brazil-origin fines
Iron Ore Carajas: $140-145 per tonne cfr China

Port prices

Pilbara Blend fines were traded at 790-805 yuan per wmt in Shandong province and Tangshan city on Thursday, compared with 805-820 yuan per wmt on Wednesday.

The latest range is equivalent to about $114-117 per tonne in the seaborne market.

Dalian Commodity Exchange
The most-traded May iron ore futures contract closed at 692.50 yuan ($109) per tonne on Thursday, down by 1 yuan per tonne from yesterday’s closing price.

Alex Theo in Singapore contributed to this article.