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%

Stronger futures lift iron ore prices


Iron ore prices have rallied to a six-week high on Tuesday, thanks to stronger futures and high steel prices seen in China despite the production cuts.

Initially, the steel output curb in northern China was viewed by the market to have negative demand for steel in near term. On the contrary, the production cuts have lifted the steel market with higher steel prices and led to growing optimism on the higher demand in early 2018.

A rally on iron ore futures on Monday has also pushed gains in coking coal and coke futures, the steel-making components as market is getting bullish about Chinese steel demand in 2018. As the country’s steel outputs are likely to fall in the winters and these will strain the existing low inventories among the mills.

Stronger futures lift iron ore prices 1

Rebar on two week high

The most-active rebar on the Shanghai Futures Exchange (SHFE) closed at 0.8% on at RMB 3,753/mt, after achieving a two-week peak of RMB 3,794. With high steel prices, iron ore prices were quick to follow as the iron ore futures on the Dalian Commodity Exchange (DCE) soared to RMB 475/mt, it’s a six week high since Sep 28, before closed later at RMB 469.

In the meantime, coke futures went up by 3.7% to RMB 1,831/mt and coking coal gained 2.6% to RMB 1,185. The rise of futures were attributed to steel closures in northern China to comply with stricter environmental regulations. The closure resulted less output from steel mills which gave rise to steel prices, then in turn supported the iron ore prices.

 

Stronger futures lift iron ore prices 2

 

China’s Oct PMI goes flat

China’s Caixin/Markit Manufacturing Purchasing Manager’s Index (PMI) posted 51.0 in October, unchanged from previous month and in line with forecast. It indicated that the Chinese economy is still expanding as any rating under 50 mark will imply that the economy is on contractionary mode.

However, the latest monthly reading highlighted to a cooldown in China’s private manufacturing sector as the Caixin/Markit PMI surveyed private firms for the poll result. The cooldown was linked to the implementation of steel mills’ output restriction in an effort to improve air quality as well as the weakening property market. In the meantime, the Chinese authority had introduced cooling measures to the heated housing prices and curtailed bank loans to property and construction activities from speculative trading.

 

India wants total ban on high grade ore exports

Indian pellet manufacturers have urged for a total ban on exports of high grade iron ore fines from the country in the interest of the local steel industry. The notion for the ban is to preserve high grade iron ore within the country to build up its steel industry.

In the meantime, the pellet makers who are forced to operate at depleted capacity, are also pitching for 30% export tax on lower grade fines with ferrous content of 45 to 58%. So far, the Indian authority has exempted export duty for low grade iron ore fines with ferrous content below 58 %, while continuing with the 30% duty on high grade iron ore.

 

Australia’s Roy Hill to expand capacity

Gina Rinehart’s Roy Hill iron ore mine seeks to expand its capacity and deploy driverless trucks to maximize assets. So far, Roy Hill has a fleet of 70 mining trucks and miner plans to introduce autonomous trucks in the second half of next year.

There is also plan to expand the mine beyond the output of 55 million tonnes per year once the mining production consistently achieved on that level. In September, the mine managed to reach that level, at 55 million tonnes per year but failed in the month of October to achieve the targeted output. Roy Hill intends to go through all its process plant and railway systems to produce 55 million tonnes reliably before expanding its mining operation to next stage.

 

Gladstone’s coal export hits high gear in Oct

Coal exports from Gladstone, Australia to China went up 32% month-on-month, up 39% year-on-year to 1.21 million mt in October 2017, based on the data of Gladstone Ports Corporation (GPC). Likewise, the exports to Japan from Gladstone port were also at a five-month high in October with 2.11 million mt, up 4% year on year and 11% higher than in September 2017.

On the contrary, the coal exports to India have reached 1.04 million mt in October 2017, down 26% month-on-month, but up 5% on year-on-year basis. The rising exports from Gladstone, indicated that Australian’s exports of metallurgical coal are gradually recovering, following the disruptions caused by Tropical Cyclone Debbie in late March 2017.

GPC expects exports to recover in 2018, back to the high levels seen in 2016. Gladstone was one of the major coking coal exporting port in Australia which accounted nearly 70% of coal handled in the port, while the remaining the 30% belongs to thermal coal.

 

Port congestion spikes coking coal prices

Prices of coking coal saw an uptick due to delays in Australian port as well as cargo restocking. According to trades sources, there are around 30-40 vessels queuing and congested at Dalrymple Bay Coal Terminal (SBCT), Queensland, Australia, longer than the queues last seen during Cyclone Debbie.

Due to the port congestion, some of the trade participants are switching out to other ports for exports such as Gladstone or Abbot point. As such, Coking coal traders are seeking for November laycan cargoes that are not loaded via Dalrymple Bay Coal Terminal (DBCT), Queensland, Australia to avoid the port congestion and delays. Due to the delays in DBCT, some Asian buyers were heard to experience 20 days to a month delay for their cargoes.

The long delay discouraged buyers from procuring spot cargoes, but most Chinese buyers are unaffected by the congestion and adopted a ‘wait and see’ before snapping up cargoes. Most Chinese mills are well-stocked at the moment, and the mills are expected not to take any market positions unless prices of domestic Chinese coal falls further.

 

Singapore Exchange sees spike in Oct swaps volume

Singapore Exchange (SGX) saw a 3% rise in coking coal swaps traded on the month of October. During the month, SGX recorded a total of 1.135 million mt of coking coal swaps, up 3% month-on-month.

Among the traded swaps volume in October, over half or 51% were done on yearly contracts, followed by 20% on monthly contracts and finally 29% on quarterly contracts. This was in contrast with September’s volume mix, where 58% of the swaps volume were done in quarterly contracts, then 31% in yearly contract and 11% on monthly contracts.

So far, SGX has captured almost 100% of the market share for the coking coal derivatives market since June 2017. The SGX coking coal swaps contracts are settled against TSI’s Australia Premium Hard Coking Coal FOB index, under Platts’ pricing unit.