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%

Great Expectation for iron ore market 2018

Happy New Year to all. As the New Year began, the world has looked into crystal ball glazing and commodities were expected to remain afloat for most of 2018. First, the oil prices rally has led a charge in stock market as oil prices pushed toward $70 per barrel.

Base metals are on the rise as well, based on sound fundamentals backed by good demand and tight supply. Iron ore, coking coal and steel may face moderation this years, but chances are prices are likely to remain higher for extended period before correction.


Iron ore prices to average $51.50/mt, says Australia

Iron ore prices are estimated to average $51.50/mt on 2018, down 20% year-on-year, according to Australia’s department of Industry, Innovation and Science. The projection was a price correction from the average of $64.30/mt in 2017 due to the increasing supply of iron ore from the miners.

The department made the prices correction in anticipation of rising supply from low-cost producers and lower demand steel from China in 2018 as compared to past years. For instances, Brazil’s Vale is projected to increase iron ore export by 7% in 2018 to 390 million tonnes at the  breakeven prices of $43/dry mt CFR China, while Rio Tinto has the lowest breakeven prices for iron ore production set among the miners at $28/dry mt CFR China.

In the meantime, the prices of coking coal are forecasted at benchmark price of $192 per tonne by the department, taking account of the growing supply that offset the market demand.


Higher Chinese appetites for mainstream iron ore in 2018

Despite lower prices forecast from Australia’s ministry, Citigroup believed that Chinese mills’ appetite for mainstream iron ore products will be higher and for longer as long the stricter environmental regulations were in place in 2018.

Based on China’s nationwide steel production data, the country’s steel output has slowed, with mills making 66.15 million tons on November 2017, or the smallest since at least February, and down from a record in August. At the same time, Chinese ports’ iron ore inventory was at an unprecedented level at 147.90 million tonnes based on Umetal’s survey for the week ended 5 Jan 2018.


Banks upgrade prices forecasts for iron ore in 2018

Macquarie Group estimated that benchmark spot price for 62% fines iron ore prices will settle around $73/mt on the first quarter of 2018, up 46% from their previous forecast of $50/mt. The Australia-headquartered bank believed that the outlook of steel demand remained bullish at least till first quarter or mid-2018 to support the iron ore demand.

Credit Suisse also expected the robust steel demand in China over the next couple of years with supports for the backlog of infrastructure and property projects already approved and funded. Besides, Macquarie foresees strong steel price in March 2018 due to depleted steel inventories of China-based mills from reduced output across winter period. Thus, the banks expect strong demand of seaborne iron ore from February 2018, and forecast prices to climb to $70/mt in the first half of 2017.

Goldman Sachs, however, predicted a drop of iron ore prices in 2018 to an average of USD55/mt due to increased supply. The bank is also wary of the policy changes set by the Chinese authority which has impacted key steel producing cities in north-eastern China to reduce output and iron ore sintering processes.


China kicks off the New Year with 4-months high PMIs

2017 ended with a bang with good economic indicators for China as the Caixin’s Purchasing Managers Index (PMI) rose to 51.5 in December, a 4-months high from 50.8 ratings recorded on November. The Caixin PMIs focuses on private small and medium-sized enterprises and the high rating above 50 meant the country’s manufacturing market is growing.

The last month of 2017 seen manufacturing output at a faster rate with robust orders and export sales, where business outlook remained optimistic as compared to November’s performance.

Similarly, the country’s Caixin/Markit services purchasing managers’ index (PMI) hit 53.9 in December, a 3 years-high since August 2014 as compared to 51.9 in November 2017. The high ratings were supported by faster new business creations since May 2015 with survey respondents reporting sales supported by strong underlying client demand and new projects.


China’s steel demand chills over winter

China’s steel demand has cooled as construction activities halted due to winter conditions among the northern provinces. Tangshan billet prices, the barometer of China’s steel demand has also dropped by RMB 50 over the weekend to RMB 3,580 on 8 Jan 2018.

Thus, many traders are losing interests in stockpiling steel products currently and saw rebar inventories tallied at a low level of 2.973 million tonnes for the week ended 5 Jan 2018, just above record-low level at late 2017.

On contrary, Chinese ports’ iron ore inventory were at its highest level at 147.90 million tonnes based on Umetal’s survey. Despite the high port inventory, iron ore traders are optimistic that the mills might enter the market to restock over the next two months. Most of the mills are believed to be seeking for high grade fines as prices for mainstream medium grade ores are expensive at the moment.


Bad weather hampers coking coal distribution

Heavy snowfall in northern China may lend support to firming coking coal CFR prices in the near term. A trade source cited that the snowfall had disrupted coking coal production and transportation, prompting the rising prices of the commodities.

Besides bad weather in China, U.S. eastern coast terminals are expecting to lift force majeure declaration in Hampton Roads, Virginia as the Atlantic coastal blizzards cleared. However, the terminals in U.S. eastern coast were unable to confirm on the lifting of the declaration, prompting unclear terminal’s operational status that added further market uncertainty.


SGX accounts 92.3% of coking coal derivatives market in 2017

The Singapore Exchange (SGX) dominated the coking coal derivatives market, averaging 92.30% of market share in 2017. In 2017 alone, the exchange cleared 14.9 million mt of coking coal swaps and options contracts in 2017, up 2.82% year-on-year.

Among the 14.9 million mt cleared last year, 14.8 million mt were for swaps and 110,000 mt for options. Then, the open interest totaled 13.91 million mt, with 13.47 million mt for swaps and 440,000 mt for options. Based on SGX data, an average of 1.24 million mt were traded on a monthly basis, or two Supramax vessels per day. In Jan-Nov 2017 period, the exchange traded 14.1 million mt in coking coal futures and swaps, more than double the combined volume of swaps traded on both the SGX and Chicago Mercantile Exchange in 2016.



The iron ore market has entered short-term bullish run with prices range of $80-82 theoretically approachable. Pei Hao, FIS iron ore analyst observed that most of the trade participants buy more futures and trade less on physical market, creating a market sentiment of less cargo purchases for utilization.

Technically, he expects any new buyers to wait for price correction above 555 in the Dalian Commodities Exchange (DCE) instead of chasing high during the market.  The first support is set at 510.5 while, the first Resistance at 578.5 level.