Poor demand sinks China iron ore prices

Posted on 09 November 2021

China's iron ore prices in both the physical and futures markets plunged further over November 1-5, as demand from domestic steelmakers was rather sluggish amid continuing production curbs and the mills' shrinking steel margins, according to market sources on Monday.


As of November 5, Mysteel PORTDEX 62% Australian Fines in Qingdao had plummeted by another Yuan 98/wmt ($15.3/t) on week to Yuan 694/wmt FOT and including the VAT, the lowest since mid-May 2020. By the same day, Mysteel SEADEX 62% Australian Fines had also refreshed the low since September 21 to settle at $93.85 CFR Qingdao, or down another $13.7/dmt on week.

In the futures market, the most-traded iron ore contract on the Dalian Commodity Exchange for January 2022 delivery also slipped further during the survey period, closing the daytime trading session at Yuan 560.5/dmt as of November 5, or Yuan 95.5/dmt below the settlement price on October 29.

Over the past week, pig iron output in China declined to a rather low level, especially with the intensified production curbs on steel mills in North China's Tangshan and Handan, the two major production hubs in Hebei, a Shanghai-based iron ore analyst commented. "So, it is not surprising to see that iron ore demand was feebler, and for prices to soften further," she said.

The local government in Tangshan, for example, had ordered steel mills under its jurisdiction to further curtail their steelmaking operations, especially sintering operations, over October 28-November 7 to tackle the heavy air pollution over the city. And during the curbing period, some steel mills even had to cut more blast furnace production due to the lack of sintered ore, as reported. A similar situation occurred in Handan city.

Meanwhile, the decline in steel margins amid the downtrend in finished steel prices has also cooled the eagerness of some steel mills to produce, Mysteel Global notes.

As of November 5, China's national price of HRB400E 20mm dia rebar under Mysteel's assessment had fallen for the fourth straight week by another Yuan 345/tonne on week to reach a four-month low of Yuan 5,016/t including the 13% VAT.

Mysteel's survey also showed the further reduction in blast furnace production, with the blast furnace capacity utilization rate among the 247 Chinese steel mills under its regular tracking dipping to 76.43% over October 29-November 4, falling by another 2.4 percentage point and reaching a new low since October 4 2019.

Under these circumstances, the volume of iron ore at Chinese ports continued to grow, with the total inventories of imported iron ore at the 45 major ports under Mysteel's survey having climbed by another 1.5% on week to 147 million tonnes by November 4, refreshing the high since April 5 2019.

Source : Mysteel Global