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%

FIS Market Review – Up, up and away

Is there any connection between iron ore and the man of steel? Yes, both went up in the matter of seconds without looking back.

Prices of iron ore moved up faster than a speeding bullet this week, breaking the sound barrier of USD90/mt at the start of the week and unbelievably settled there comfortable for the rest of the week of Feb 13-17, 2017.

This price spike has created a domino effect with futures trading in Shanghai and Dalian hiked to new height despite downward pressure as the winter heating season drawn to a close during mid-March. However, coking coal did not follow the iron ore bonanza and instead descend to a ‘dark ages’ where buyers hesitate to take actions in waiting for further prices drop in near term.

As dictated by Newton’s Third Law, for every action there is an equal and opposite reaction. The same applied to the iron ore rally, as we predicted price correction for the steel-making commodity to scale down to USD85 by next week.


The buying rush is over. After the frantic procurement from the post-Lunar New Year boost, the China-based mills seem to be satisfied with their restocking efforts and slowed its buying appetite as the week drawn to a close.

Due to the slowdown in buying demand, a price correction has taken place, prompting more mills to adopt a wait and see attitude in waiting prices to drop further or stabilise first before entering the market again. Similarly, the buying interests for port iron ore cargoes proceed at snail-pace with many offers but no buyers. Low-grade fines cargoes found hard to attract buyers’ attention especially those of Indian origin.

Based on to Umetal’s survey of 42 ports in China, the total iron ore inventory still recorded at high volume of 124.89 million tonnes on 17 Feb 2017 but down 240,000 tonnes at week- on-week basis.

Fig 1: China’s Port Inventory

Iron ore inventory Eng

Source: Umetal

Despite the expected price correction, Chris Lynch, CFO of Rio Tinto remained upbeat on iron ore prices against market forecasts of an imminent price collapse. He told Bloomberg that the price would not “fall off the cliffs” as a new trend is emerging among the Chinese mills in switching to less polluting and more efficient methods in steel production.

Thus, the mills prefer to import higher-quality iron ore for feedstocks and less of using scrap metals to comply with the stricter environmental protection regulations set by the Chinese authority.


Plunges in futures to dent iron ore rally. The sudden plunges in Dalian Commodities Exchange (DCE) futures have impacted the prices of iron ore that scaled down by USD1/mt to USD90.85/mt CFR North China on 16 Feb 2017.

The decline has deflated buyers’ confidence despite the high margins maintained by the steel-makers as price of Tangshan billets, an indicative barometer of steel demand went up RMB 60 to RMB 3,170 on 17 Feb 2017. However, one trade source pointed that the higher billet prices may be subjected to speculative trading based on expectation of stronger steel demand to come the seasonal robust Q2 period.

Fig 2: Tangshan billet prices

Tangshan billet price Eng

Source: Umetal

During the Q2 period, most traders expected better demand for raw materials due to higher seasonal construction activities in China. For instance, Japan’s Nippon Steel & Sumitomo Metal believed steel prices in China to hold firm till the country’s governing Communist Party commenced their congress later this year.

Therefore, the Japanese steel-maker aimed to raise steel product prices nd passed on the higher steel-making costs to the buyers for the upcoming financial year beginning at April 2017.


China may reinstate the 276 working days for coal mining. With warmer weather returning in China, the National Development and Reform Commission (NDRC) may reverse the policy and imposed stricter working days to adjust to the new demand trend. Previously, the Chinese authority relaxed the working-day restriction ahead of the winter season to meet with the country’s heating needs.

A trade source indicated that the 276 working days may be resumed during the April till August period, without making any distinction between the thermal or coking coal output and labour policy. However, as of now, NDRC remained mute on the limitation of working days with no announcement of any decision made.

With uncertainty on China’s policy, many potential buyers are waiting for market clarity before making additional procurement of cargoes for the moment. They are concerned that prices will once again spiked up as supplies dwindled on the reinstatement of the 276 working days as opposed to the current 330 work days on Chinese coal mines.


Coking coal prices to surge on North Korea embargo.

China’s ban on North Korea coal has triggered a price spike in steel, coke and coking coal futures. China’s decision was announced on 18 Feb 2017 to stop all imports of coal from North Korea, after the latter launched an intermediate-range ballistic missile test.

Since then, the future market has reacted to the embargo with rebar future, coke and coking coal all soaring by 2.7%, 2.3% and 2.4 % respectively on Monday, 20 Feb 2017. Previously, China has imported 22.48 million tonnes of North Korea’s anthracite in 2016, up 14.5% year-on-year. The commodity is a high-quality coal used to make coke, which is a key ingredient in steelmaking.


India’s iron ore output to hit 185 million tonnes in 2021. Indian production of iron ore is expected to hit 185 million tonnes over the next four years. Based on the BMI Research, the country is slated to grow its iron ore output from 136 million tonnes in 2017 to 185 million tonnes by 2021.

The growth is supported by the Indian government policy to remove of the export taxes for low grade iron ores in its national budget convention. According to budget policy, the export duties of iron ore lumps and fines below 58% Fe content had been reduced from 30% previously to the current 10%. The tax reduction will make Indian exports more competitive in the global market and boost exports volumes such as from the western Indian state of Goa.

This growing supply can also be seen in Brazil’s Vale, which produced 349 million tonnes (mt) of iron ore in 2016, beating its own guideline of 340-350 mt set beforehand. The increase in output pointed to the opening of the new S11D mine complex at the Pará region of Brazil in last December. Thus, the mining production for 4Q16 increased by 4.5% year-on-year to 92.4 mt, accounting to an overall 1% increment for the full-year production.

The S11D mine is expected to add around 90 mt of annual capacity to Vale’s output by 2020, and have mineral potential of 10 billion tonnes of iron ore, while mining block such as C and D are believed to have another reserves of 4.2 billion tonnes.