0.00 0.00%



225.00 2.05%

Iron Ore


0.85 1.12%

Sing 380



Coking Coal


0.00 0.00%

Nola Urea


0.00 0.00%

China’s steel and iron ore demand moves at snail pace

Is China’s steel and iron ore demand in imminent danger of a slowdown? Some signs seem to be surfacing as banks and analysts began to adopt bearish market sentiments as the market proceed toward the second quarter.

Last week, market uncertainty had gripped the major economies of the world with fears of trade wars in retaliation to US imposed of 25% tariffs of steel imports. The European Union was one of the first to squeeze the trigger with proposed retaliation of tariffs on US consumer goods of Levi jeans, bourbon whiskey and so on.

But to be honest, these EU imposed consumer goods tariffs posed a lesser threat to US economy as these consumers item can be easily replaced and substituted by other brands of whiskeys and of course jeans. But if the lists of import duties got extended to luxury items like Apple iphone and information services like Google, things will go wary for the US economy and for the EU as well due to EU’s over-reliance on US for tech products.

On the other hands, China seem better immune thanks to their “great firewall” that did not allow Google to come in and developed their own search engine Baidu instead. In addition, China has been manufacturing their very own tech products like Huawei to compete against Apple. However, no matter how sheltered the Chinese economy is, its steel and iron ore market are showing cracks which tell a better story on its dependance to the global economy.


China’s iron ore import plunges on February

China’s import of iron ore fell in February due to the extended cut in steel production during winter seasons. As such, the country’s import of high grade iron ore fines and lump ore from Australia, Brazil and South Africa dropped by 16% month-on-month to 84.3 million tonnes in February 2018, but monthly import saw a gain of 5% at year-on-year basis. Overall, China’s total shipment for 2017 topped record imports in 2016 of just over 1 billion tonnes.

The low monthly import volumes have an adverse effect on the future markets which remained on downtrend for the most of the time last week. However, other factors such as steel demand weakness in China contributed to the drop as well, where steel inventory among mills were high. Moreover, the imposed US steel import tariffs had added on to much market uncertainty, as concerns grew over a looming trade war ahead.


China’s steel inventory remains high in February

Most of the China-based mills are sitting on high rebar inventory build-up among the steel mills at around 7.13 million tonnes in February, based on data from SteelHome Consultancy. In the meantime, SteelHome Consultancy also estimated at high steel inventory held among the mills in China at record high of 155.8 million tonne by February.

The high steel supply dampened the market sentiments for more iron ore demand as the drawdown for steel products seem slower than usual as compared to the seasonal high construction activities peak period for China.

According to Custeel’s survey, the Iron ore inventory among the Chinese ports also remained high as well at 157.85 million tonnes on 9 Mar 2018, despite a strong drawdown of cargoes of 780,000 tonnes at week-on-week basis.


Barclays predicts iron ore prices to average USD 55/mt by June

Due to weak steel demand in China, Barclays banks predicted prices of iron ore to average USD 55/mt by June 2018. The bearish market sentiment was attributed to the low steel market Purchasing Managers’ Index (PMI) recorded in February at 49.5 ratings as compared 50.9 readings in January 2018. As of all PMI readings, any rating above the 50 level indicated the market in expansionary mode while any reading under it meant that the market is in contractionary mode.

The UK-headquartered bank also foresaw the June quarter of 2018 or Q2 2018 as the nadir for iron ore prices at around USD 55/mt. Then, the iron ore prices are predicted to move slightly upward to average around USD 58/mt in 3Q 2018 and then at USD 62/mt in Q4 2018.

Overall, the iron prices is slated to reach an annual average of USD62/mt, much lower than the historical average of USD 71/mt in 2017. The rationale for the lower iron ore prices lie in the lower margins that Chinese steelmakers are expected to make in 2018 due to steel glut.
Macquarie foresees low grade iron ore to exit the seaborne market

Macquarie Bank estimated the low grade iron ore supply to exit the market in the near future. For instance, the bank estimated that seaborne iron ore need to price at the high USD 60s/mt to maintain around 92 million tonnes of low grade iron ore afloat in the market.

Thus, the bank believed that most of the miners are making money at the moment from the seaborne market with the exception of low grade iron ore marginal suppliers. According to the estimate of the Australia-headquartered bank, almost all iron ore producers are earning their fair share with seaborne iron ore priced at the USD 65-70/mt range.
With the exception of producer of low grade iron ore that was not favoured by the China-based mills which sought high grade seaborne ore to comply with environmental regulations and to improve blast furnaces productivity.


Coking coal market to remain bullish on tight supply

Coking coal market remained bullish with much buying interests from Chinese traders. However, many Chinese buyers are holding back from purchase in hoping for further price correction in near term.

The bullish sentiment found support from the Chinese government’s decision to cut down additional 30 million mt of steel capacity and 150 million mt of coal capacity in 2018. The reduced supply will give rise to seaborne coking coal profitability, especially when China is facing tight domestic coal supply at the moment.



FIS market analyst, Pei Hao predicted a short term bearish market for iron ore. According to him, the iron ore prices will plunge in near term due to huge inventories of steels in the mills and congestion of ships in transporting the commodity on the river.

“The market is technically bearish since a significant “triple top” pattern was created on last Thursday.” opined Hao.

He explained that the third “top” was found by a significant low volume, indicating an exhaustion of market. Going forward, some new lows are expected in the next few days and saw the MACD widening at the negative area with first support on 463.5, while first Resistance at 490.