Posted on 18 Oct 2021
China's iron ore prices have recovered moderately this week amid strengthening finished steel prices and the slight improvement in demand from domestic steelmakers prior to, and following, the National Day holiday over October 1-7. But whether the price recovery can be sustained remains a moot point given the outlook for ore demand in coming months, Mysteel Global noted.
On October 11, Mysteel SEADEX 62% Australian Fines, for example, had recovered to as high as $136.25/dmt CFR Qingdao, well above the 20-month low of $90.9/dmt seen over September 20-21. By October 13 the index had gradually eased to $121.55/dmt, but this was only a tiny $0.1/dmt lower month-on-month.
During the last week of September, many domestic steelmakers secured additional ore stocks before the long holiday when ore trading would temporarily cease and ore deliveries would slow, and it was this scramble for tonnage that helped support prices. After the break, many mills also needed to rebuild stocks to replace the tonnes they’d consumed during the holidays.
Giving a further boost to prices this week was news that some steelmakers in East China's Jiangsu whose operations had previously been curbed, were being allowed to ramp up steel production, a relaxation that if replicated by local governments in other regions would lift ore demand.
Over October 1-7, blast furnace capacity utilization among the 247 Chinese steel mills under Mysteel’s survey had recovered by 1.25 percentage points on week to 79.94% from a four-week decline, though the run rate was still at a low level.
Source: Mysteel
Nevertheless, for the rest of the year, iron ore demand and prices will likely remain under great pressure, given that China’s central government remains determined to achieve an on-year decline in the nation's crude steel output. Moreover, on Wednesday Beijing unveiled tough winter-production curbs on steel mills in North China's Beijing-Tianjin-Hebei region for the November-15-March 15 2022 period, as reported.
In contrast to the fluctuation in iron ore prices, the constraints on steel production mandated in July have seen Chinese domestic steel prices climb steadily to record highs in some cases, even though spot steel demand has yet to see any substantial improvement.
China’s national price of HRB400E 20mm dia rebar under Mysteel’s assessment, the representative product of the country’s spot steel market, had strengthened to Yuan 6,039/tonne ($936.6/t) as of October 9 – the highest since May 14 and close to the multi-year high of Yuan 6,348/t recorded on May 12. Though the price subsequently slid to Yuan 5,899 on October 13, it was still Yuan 310/t higher on month.
Source:Mysteel Global
