Asian iron ore prices hit 8-month high amid firm fundamentals, resilient buying

Seaborne iron ore prices picked up momentum to break through the $130/dmt CFR China mark on Nov. 14 for the first time since March.

Platts, part of S&P Global Commodity Insights, assessed the 62% Fe Iron Ore Index at $132/dry mt CFR North China on Nov. 15.

The strengthening iron ore prices observed in recent days are supported by various factors, including recovering demand supply fundamentals coupled with fading discussions around Chinese steel production control and sintering cuts, as well as China positive macroeconomics outlook, market sources told S&P Global Commodity Insights.

Although some participants were concerned that a sharp rise may cause the market to see a price correction in the upcoming days, the strong demand from steel mills and macro-factors has showed continuous support for the market prices.

“The high pig iron production, strong market sentiment amid macroeconomic policies and low port stock inventory drove seaborne prices higher,” according to analysts from S&P Global Commodity Insights.

The observed recovered liquidity in downstream demand, has in turned supported the high steel production level, and with the improving steel production margins, Chinese steel mills have been continuing high operation rates for blast furnaces.

“Chinese blast furnace steel mills kept high operating rates upon the recovery of finished steel production margins, supporting a firm iron ore demand,” a Chinese steel mill source said.

“We are not seeing mills going through any major production cuts, so the demand for raw materials will continue to remain,” an International trader said.

According to China National Bureau of Statistics data, China’s crude steel production volume in the first 10 months of the year increased 1.4%, on the year to 87.47 million mt.

Meanwhile, little changes were heard on the supply front. Ample supply of medium grade fines such as Newman and MACF fines, as well as multiple cargoes of PBF was observed to exchanged hands throughout the past week.

And while trading activities for Brazilians fines were few and far between, with a decrease in export volume hearing to have drop by 4 million mt in the week, the market has yet to observe any supply tightness in the market, according to market sources.

Additionally, on the macroeconomic end, China central government’s policies to issue Yuan 1 trillion ($139 billion) in additional government bonds in the fourth quarter to support the rebuilding of disaster-hit areas and raise the country’s disaster relief capabilities, has also provided further market confidence in both steel and iron ore demand.

Similarly, the People’s Bank of China has offered 1.45 trillion yuan ($200 billion) of cash through its medium-term lending facility on Nov. 15, in attempts to maintain liquidity in the banking system and lend support to China’s economy.

“These policies will definitely help to stimulate liquidity in the market, though we have yet to see the impacts on demand as it is too early, but it will definitely ease some pressure on market,” a China based iron ore trader shared.
Source: Platts