Capesize

17950

Sep-17
0.00 0.00%

Panamax

11175

Sep-17
225.00 2.05%

Iron Ore

76.5

Sep-17
0.85 1.12%

Sing 380

278.25

Oct-17

Coking Coal

208

Sep-17
0.00 0.00%

Nola Urea

212.5

Sep-17
0.00 0.00%

DCE opens up for foreign investors


Foreign investors may soon be allowed to trade on China’s iron ore futures trading platform on similar level as the Chinese domestic traders. Dalian Commodity Exchange (DCE) has been preparing for the move toward an internationally recognized, fair and transparent iron-ore futures benchmark with domestic and foreign investors trading on the same platform.

The opening up of the platform trading is still work in progress as the exchange is still soliciting public responses on the draft rules for the change as well as seeking guidance from the China Securities Regulatory Commission.

So far, no deadline has been given but the bourse sees opening up as a broader move by the Chinese government to bring in more foreign investors to its commodities exchanges and expand the country’s influence in global markets. The opening of the derivative markets had been discussed for some time and in addition to DCE, the Shanghai Futures Exchange is also expected to launch a long-awaited Chinese oil futures contract in the future.

China’s construction activity slows down as Lunar New Year approaches

With just two weeks to the Lunar New Year, construction activities in China continued to dwindle, affecting demand of iron ore and steel. In addition, some of the construction and mining workers are heading home to prepare for the upcoming spring festival.

On the other hand, steel mills were heard to hold around 35 days of iron ore inventories, sufficient to hold out beyond the Chinese New year holidays. Thus, many mills did not want to hold too much raw materials at the moment and have few incentives for additional purchases.

WSA expects slowing China’s crude steel production in 2018

World Steel Association (WSA) expects the crude steel output in 2018 to be similar rate as 2017, but highlighted uncertainty on China’ demand. According to the association, global production of crude steel grew by 5.3% year-on-year to 1,691.2 million tonnes in 2017.

The higher output was being complemented by rising earnings for steel-making as demand remained robust last year. Steel-making in Turkey and Brazil were ones of the fastest growing sectors at 2017, registering an increase of 13.1% and 9.9% year-on-year respectively.

Despite the high output, the association was concerned over slowing output iron ore in China, as the country’s annualised production slid from 874 million tonnes in September to 789 million tonnes in December, portraying a gradual decline as the year 2017 drawn to the close. This trend may well follow into 2018, due to stricter Chinese authority’s clampdown on mills’ production to improve air quality.

India’s steel output to jump by 10% on the fiscal year of 2018-2019

India’s steel production is estimated to jump by 10% year-on-year to 103 million tonnes in the fiscal year of 2018-2019, according to the India’s Steel ministry. So far, the country’s crude steel production had increased 6% year-on-year to 101.23 million tonnes during the calendar year of 2017.

The rising steel output is in line with the country’s target of tripling its output over the next decade, driven by infrastructure demands on housing, roads, construction of railway stations, and airports.

Goldman Sachs upgrades Q1 iron ore price at USD85/mt

Goldman Sachs has revised its forecast for iron ore prices to upgrade at USD85/mt for three month target or Q1 2018 from the previous USD55/mt. The upward revision is associated with the ‘3Rs’: Reflation, Re-leveraging and Re-convergence that Goldman used to review on the bullish overweight commodity outlook.

For coking coal prices, the investment bank had upgraded its forecast to USD 220/mt for the three month target from previous forecast of USD165/mt. The rationale for the price upgrade pointed to the limited supply, more demand and lower than expected commodity inventories on the current market situation.

Cyclone alert on coal producing region of Australia

Coking coal market is once again on cyclone alert as there is a probability of tropical storm to occur in the northern Coral Sea. The potential storm over Coral Sea area is in close proximity to coal-producing region of Queensland. For the moment, coking coal prices remained unaffected by the news of cyclone but on rather by the supply tightening due to the due to the derailment of Blackwater railway system, located in Central Queensland.

In the meantime, some buying interest were heard among the Indian traders whom are expected to enter the spot market soon as steel production went well in their domestic market. However, many of the Indian traders found the current FOB level rather high and expects the FOB market to be more sustainable around $180-$200/mt FOB Australia for first-tier coking coal.

Verdict

According to FIS analyst, Pei Hao, the iron ore market rebounded on Monday, 5 Feb due to robust DCE Coke prices. He noted that the DCE Coke has registered a biggest one-day growth of the year at 3.84%, due to the negotiation between physical traders and mills to hold the price before Lunar New Year.

With the rally in the derivatives, Pei expects the mills’ operating rate to recover which led to more demand for iron ore, giving more room for the commodity to rebound.

“Investors could follow coke to see the money sentiment on ferrous market and keep watching the shift among different ferrous products,” said Pei. Thus, he concluded that the technical is bullish over the short term with first support on 490 and first Resistance at 536.

5Feb2018