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%

Steel resiliency keeps market afloat


This week, the iron ore spot market has made a sharp turnaround to hit a 2 month high on Monday. The force behind the scene pointed to a good steel margins that prompted the China-based mills to seek for medium to high grade ores.

In this unexpected turn, the spot iron ore price has hovered high around above USD63/mt amid all the lower construction activities associated with the winter period as well as steel production cuts in northern China.

This market resiliency pointed to the barometer of steel demand, or Tangshan steel billet prices that were maintained above RMB 3,800 more or less for the past week.  Due to the high steel prices, the southern China-based mills continued to chase for productivity as they are not affected by production limitation as seen in the northern Chinese mills.

In addition, there was an air of optimism among the miners as some planned for mining restart after incident, while some planned to restart operation next year.

 

21Nov2017 Tangshan

 

Rekindling the buying interest for mid to high grade ores

Iron ore buyers have rekindled their buying interest on the medium grade fines over high grade fines, thanks to higher steel prices. The change in preference was due to trade participants concerns over the long term sustainability of the current steel margins enjoyed by China-based mills.

As such, some dip buying of iron ore cargoes were seen among Chinese ports by mainly mills based in eastern and southern China. On the contrary, the mills based in northern China were in no rush to procure cargoes due to reduced steel production imposed on them by the Chinese authority. Besides, there is huge arrival of fines cargoes in December which may deflate prices further in allowing the mills to pick up cheaper materials in near term.

 

Iron ore pellet demand poises to rise further

Demand of iron ore pellet has been rising, thanks to the good pellet margins. Based on trade sources, the eastern and southern China-based mills are seeking for pellet feeds as they still have some pelletizing capacity available and will like to capitalize on higher pellet premium.

In addition, the lack of available China domestic concentrates supply further pushed up the demand of pellet prices as buyers are seeking alternative feedstocks for mills. With further seasonal production cut in pellet supply from Ukraine, the trade source expects pellet prices to rise further.

 

Flinders Mines to restart after blaze

Australia’s Flinders Mines has restarted its Pilbara iron ore mining operation last Wednesday after closure earlier on due to a bushfire. Four days prior to the restart, an evacuation order was issued after a blaze from Karijini National Park threatened mining operation in Pilbara.

Flinders Mines then reported some “minor damage” sustained on its site and systems. Following the restart, the miner declared that the minor site works will be completed over coming weeks and the site will be closed for the remainder of the year ahead of the wet season.

 

Bloom Lake mine eyes for restart in 2018

Canada’s Bloom Lake mine plans to restart by March next year, after being closed for almost four years. Previously, the owner of the iron ore mine, Cliffs Natural Resources shut the mining production in late 2014 for cost-saving purposes. Then in 2016, Montreal-based Champion Iron ore, an iron ore explorer bought the mine and raised around USD350 million to restart mining operation next year.

The Bloom Lake mine is expected to produce 7.4 million tonnes of iron ore concentrate, which the miner has already secured a major buyer. In August 2017, the Champion Iron ore has signed a long term agreement with Glencore to buy ore from the mine for the next decade. Moreover, both the commodities trader and miner also agreed to invest over USD56 million in the mining project.

 

India to amend export tax on medium-grade iron ore

India may cut or scrap export tax on medium-grade iron ore, much to the disapproval of the country’s steel-makers. The proposal of the cutting 30% or entire scrapping of the tariff was backed by the India’s mining industry, which lobbied for months after the country’s iron ore stockpiles reached to a record-level at 149 million tonnes in March 2017. To some trade participants, the tax cut or abolishment may make the industry more competitive to a certain extent.

The notion was against the wishes of India’s steel ministry which favors tax levy to keep at 30%. As the steel ministry thinks that a lower export duty could lead to a domestic shortage of iron ore and instead urged for pelletisation of iron ore to generate demand from the huge stockpiles.

The final decision of whether to amend the export tax rests solely on the shoulder of India’s commerce ministry, which may decide to cut the duty in its 2018/19 budget statement, at February 2018.

 

Iran to export 20 million tonnes of iron ore per year

Iran has exported around 11.09 million tonnes of iron ore over the April-October period, the first seven month of the Iranian year, up 11.8% at year-on-year basis. Around 90% of the exports or 9.98 million tonnes of iron ore were shipped to China during this period. The country also imported around 193,000 tonnes of metallurgical coal and coke in this period, or a gain of 27% at year-on-year basis.

At this rate, one trader speculated that the Iranian iron ore export may reach 20 million tonnes or more in the current Iranian year ending at March 2018. Most of the exports comprises of iron ore concentrates and from huge state miners in Iran.

 

Prices of coking coal inches up upon concerns

Threat of heavy seasonal rainfall in Australia and the delays in Dalrymple Bay Coal Terminal (DBCT) had pushed premium coking coal prices higher. According to the data of DBCT, there are around 48 vessels queueing near the port last week.

In the meantime, China-based mills are seeking high-CSR coal for greater efficiency at the moment as production cuts occurred during the winter period. However, some mills found that the seaborne prices are high and expressed that they will bid no higher than USD185/mt CFR China for premium low-vol coal with 72-74% CSR.

Apparently, the ongoing steel production cut in China has reduced the Chinese mills’ appetites to take in new cargoes and causing them to lower their bids for any imports.

 

Verdict

Overall, the iron ore markets may drift from neutral to short term bullish, driven by the high steel prices.  In the paper market, FIS foresees that iron ore contango is not going to last for another year and expects money movements to diverge on the Jan and May contracts.

As such, FIS predict some major active shift to the May contract in Dalian Commodities Exchange (DCE) for the next 1 or 2 week. The intraday booming of ferrous market is majorly pulled by the strong May, while DCE Jan is still walking around RMB 470 area – a bullish trend that has not been confirmed yet.

 

21nov2017