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%

Lunar New Year’s restocking near completion


With Lunar New Year round the corner, all the trade participants had apparently completed their restocking of iron ore. Going forward, the traders will depend on long term contract cargoes and just-in-time purchases from docksides stocks to top up any shortfall.

The near completion of the restocking ahead of Chinese festive season saw a draw down of port inventory in China. As such, the total port inventory stood at 151.69 million tonnes on Friday, 26 Jan 2018, down 1.19 million tonnes week-on-week, according to Custeel’s survey of 42 ports in China.

Beyond the Lunar New Year, seaborne iron ore demand seem to be overshadow by the huge supply inflows from the miners due to ramp up of capacity. Only bad weather and occasionally transportation disruption stood at the way for all these surplus cargoes arriving to China.

 

Port Congestion in Chinese ports due to heavy snows

Bad weather at Chinese ports had caused congestion and vessels delays, affecting iron ore cargoes from discharging. Apparently, the waiting time for vessels berthing in eastern Chinese ports have increased to a range of 5-15 days.

Ports affected by heavy rain and snow consists of Taicang, Nantong, Zhangjiagang and Zhenjiang along the Yangtze River, resulting in long vessels queue at the berth for discharge. Due to these delays, the demurrage costs of the shipment came in between $12,000 to $15,000 per day.

So far, snowstorm has been upgraded to “orange alert” in central and eastern China and these port congestion are forecasted to last for another week, disrupting the movement of the vessels and cargo inflows.

 

China’s iron ore output went up by 0.9% in December

China’s iron ore output went up by 0.9% month-on-month to 109.22 million tonnes in December 2017. The December rise in output was the smallest monthly gain since May 2017. In the meantime, the country has produced 17.35 million tonnes of rebars in December, up 8.9% year-on-year, based on the data from National Bureau of Statistics (NBS).

The bureau report recorded a full-year production at 199.98 million tonnes for 2017, higher as compared to output volumes in 2015 and 2016.

 

Hebei pushes for steel and iron capacity cuts in 2018

China’s Hebei province will continue steel and iron capacity cuts in 2018, according to government official statement. The statement cited that the country’s leading iron and steel producing province will reduce its steel and iron capacity by 10 million tonnes this year, while coal production by 10.6 million tonnes in 2018.

The capacity cut is part of the three year industrial reform plan drafted by the provincial authority to shift its existing steel and coal industry to high-end industry. From 2013 to 2017, the province had overshot its five-year target and cut production capacity of steel, iron and concrete by 69.93 million, 64.42 million and 70.57 million tonnes respectively.

The capacity cut is also in line with China’s national policy of focusing on quality and profit improvement, while cutting overcapacity in heavy industries. So far, China plans to eliminate 100 million to 150 million tonnes of crude steel capacity and 500 million tonnes of coal in the five years from 2016. The country has since achieved its milestone in 2017 for capacity cuts in both sectors.

 

Kumba mines produces 45 million tonnes in 2017, up 8%

South African-based Kumba Iron Ore (Kumba) had produced 45 million tonnes of iron ore in 2017, up 8% year-on-year, thanks to better mines output in Northern Cape. The two mines in Northern Cape namely Sishen mine and Kolomela mine saw increased output by 10% and 9% year-on-year to 31 and 14 million tonnes respectively for fiscal year ending in December 2017.

Exports sales volumes of Kumba have also rose by 7% to 41.6-million tonnes while domestic sales, largely to ArcelorMittal SA, the country’s largest steel maker, saw a dip of 4% to 3.28-million tonnes. In the meantime, the miner has increased its stockpiled ore for sale to 4.3 million tonnes in 2017, up 23% year-on-year basis.

Meanwhile, the country’s steel output went up by 2.6% year-on-year to 6.301 million tonnes in 2017, based on data from World Steel Association (WSA). During the second half of 2017, steel production in South Africa increased by 20.9% year-on-year due to less electricity-supply disruption and subdued domestic demand.

The rising steel production has kept up with the construction boom in South Africa, where the real value of non-residential buildings completed soared by 38.9% year on year in the first 11 months of 2017. So far, the infrastructure boom saw completions of retail, office and banking space, and at some point saw shortages of steel reinforcing bars.

 

India’s iron ore estimates to drop due to mine closures

Not all the iron ore producers boasted high production in 2018. For instance, India’s iron ore production is forecasted to fall 15% in financial year of 2018, after gains for two successive years. The fall in output was traced to the closure of seven working mines in Odisha and lesser production in Goa, impacting their combined annual capacity at 20 million tonnes per year.

The production loss would be reflected in the January-March quarter. According to India’s Union mines ministry, Odisha is the country’s largest producer which contributed 102 million tonnes to the pan-India output of 191 million tonnes in last fiscal. Exports of iron ore of Fe grade above 58% are most likely to be affected in fiscal year of 2018 due to low export volume from Goa and the 30% export duty imposed on them.

 

Tokyo Steel to hike prices in February

Tokyo Steel Manufacturing Co. (Tokyo Steel) will raise steel product prices in February 2018, to reflect on the higher transportation cost. The price hike will be the third consecutive months of rise since the Japanese steel-maker raises its prices to offset the rising costs of raw materials and transportation.

Tokyo Steel was heard to raise the prices across 13 steel products in February by 1.2% to 2.5% or JPY 1,000-2,000 or around USD 9-18 per tonne. The prices surge in February was slightly lower than previous price hike of JPY 3,000 seen in January and December. Despite the prices hike, the steelmaker has kept prices of two steel products unchanged.

In the meantime, Japan’s domestic demand for steel remained high due to the construction activities in preparation ahead of the Olympics 2020 as well as demand for automobile and machinery segments.

 

Supply woes have little impact on coking coal market

Coking coal trade participants were concerned over the derailment at Blackwater rail system and Teck’s Elkview mine on their impacts to the FOB market. However, a trade source indicated that the market might already factored these into the prices especially for premium cargoes. For the second-tier coking coal, the impact of the derailment will be greater and affected prices going forward.

In the meantime, some buying interests were seen on the coking coal market, involving mostly Chinese trade participants. However, some Chinese buyers were heard to hold back from purchases as they predicted prices to fall further ahead of the Lunar New year in mid-February.

 

Verdict

According to FIS analyst, Pei Hao, the iron ore market has underwent corrections as some steel mills are done with the short term restocking. Any further restocking or overstocking will drive the market down into a deeper short term correction.

Thus, he concluded that the technical is bearish at the moment with the MACD widening. Similarly, the slow stochastic is widening downward and the CCI broke -100. He expects the first support on 510.5 and first Resistance at 536.

29Jan2018