Seaborne iron ore concentrate, pellet prices track futures strength despite limited liquidity

Prices for seaborne iron ore concentrate and pellet increased in the week ended Friday October 1, tracking the strength observed in futures. But trading activity was limited due to a holiday in China, sources said.

Fastmarkets iron ore indices
66% Fe concentrate, cfr Qingdao: $136.54 per tonne, up $10.84 per tonne.
65% Fe blast furnace pellet, cfr Qingdao: $180.03 per tonne, up $15.92 per tonne.
Iron ore pellet premium over 65% Fe fines, cfr China: $41.20 per tonne, up $4 per tonne.

Key drivers
Demand for iron ore concentrate and pellet was lackluster ahead of China’s weeklong National Day holiday (October 1-7), sources told Fastmarkets.

Steel mills had shown less buying interest due to the approaching holiday. At the same time, the typical restocking seen before the seven-day break was not as active compared with recent years amid ongoing steel production cuts because mills need less high-grade iron ore for production, a buyer source in southern China said.

A trading source in Hong Kong said the weak demand for high-grade iron ore also contributed to fewer offers in the market.

Sintering restrictions were expected to start between late October and early November, so demand for sintering concentrate could weaken further, he added.

An analyst in Shanghai said the prices of high-grade iron ore followed the price uptrend in fines and futures, and that the premium or discount level for iron ore concentrate was relatively stable.

A trading source in Singapore said sentiment in the futures market had been positive ahead of China’s National Day holiday, and the rising futures prices had allowed that for iron ore concentrate and pellet to rise during the week.

The November swaps contract for iron ore 65% Fe on the Singapore Exchange settled at $136.42 per tonne on October 1, up by 3.4% from $131.95 per tonne a week earlier.

A trading source in southern China said some high-quality iron ore concentrate still could trade at a premium, but others with high impurity in silica only had chance to attract buyers with a discount of over $5 per tonne now.

Sources noted upside potential in iron ore pellet prices due to the likely stricter sintering restrictions during the winter months in China.

In addition to the slight recovery in demand for iron ore pellet, supply was limited because India-based suppliers were still focusing on the Indian domestic market, which provided support to seaborne prices, a trading source in Singapore said.

Quote of the week
“The crude steel production limits are expected to be less strict in first quarter of 2022 compared with now. Though there are some emissions restrictions during the upcoming winter months, steel mills with less restriction in southern China could ramp up production quickly and help the demand recovery in the high-grade iron ore,” a second trading source in Singapore said.

Trades/offers/bids heard in the market
Concentrate
Vale, tender, 170,000 tonnes of 63% Fe Pellet Feed Fines Guaiba 2, traded at Fastmarkets’ index for iron ore 62% Fe fines, cfr Qingdao for the month of the notice of readiness (NOR) at the port of discharge, adjusted for Fe content, plus a discount of $7 per tonne, laycan September 26-October 5.

Spot market, 85,000 tonnes of 63.5% Fe PMC concentrate, traded at a 62% Fe index for the month of the NOR at the port of discharge, adjusted for Fe content, plus a premium of $1 per tonne, laycan October 6-15.

Pellets
Spot market, 50,000 tonnes of 64% Fe BRPL pellets, traded at the average of a 62% Fe index at the month after the NOR at the port of discharge plus its pellet premium, September loading.

Spot market, 63% Fe Jindal pellets, offered at $168 per tonne cfr China, end-September to early October loading.

Spot market, 63% Fe Rashmi pellets, offered at $170 per tonne cfr China, October loading.

Alex Theo in Singapore contributed to this report.

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