IRON ORE DAILY: Prices close to $90 per tonne cfr on further supply delays

Physical iron ore prices continued to rise on Tuesday April 2, closing in on $90 per tonne with yet more seaborne supply disruptions reported.

MB 62% Fe Iron Ore Index: $89.89 per tonne cfr Qingdao, up $1.20 per tonne.
MB 62% Fe Pilbara Blend Fines Index: $89.01 per tonne cfr Qingdao, up $1.20 per tonne.
MB 62% Fe Iron Ore Index-Low Alumina: $92.14 per tonne cfr Qingdao, up $1.91 per tonne.
MB 58% Fe Premium Index: $81.07 per tonne cfr Qingdao, up $1.21 per tonne.
MB 65% Fe Iron Ore Index: $102.40 per tonne cfr Qingdao, up $1.40 per tonne.
MB 62% Fe China Port Price Index: 651 yuan per wet metric tonne (implied 62% Fe China Port Price $88.82 per dry tonne), up 9 yuan per wmt.
MB 63% Fe Australian Lump Premium: $0.3200 per dry metric tonne unit, down $0.0350 per dry metric tonne unit.

Key drivers
BHP said early on Tuesday that it expects iron ore production to fall by 6-8 million tonnes on a 100% basis at its Western Australia operations due to rail transportation problems caused by floods caused by Cyclone Veronica last month.

Operations at the Port of Port Hedland are not expected to return to full capacity until later in April, the miner added.

This follows Rio Tinto’s warning on Monday of a 14-million-tonne drop in output about its Australian operations, partly as a result of the same cyclone.

Both Rio and BHP have notified their customers there is likely to be a delay of around one week for April shipments, according to Chinese sources.

This could lead to a short-term supply gap for a lot of Chinese mills, a trader in Shanghai told Fastmarkets.

Cargoes of Pilbara Blend fines that have been shipped out are much sought after, he added.

There have been inquiries about cargoes linked to the May average of indices, with one transaction in the spot market at a premium of $1.60 per tonne for a Capesize shipment of Pilbara Blend fines. And some traders expect the premium to rise to about $1.80 per tonne.

Spot iron ore trading at Chinese ports boomed on Tuesday, with prices increasing in line with further gains in the country’s futures market.

Trading activity involving the Singapore Exchange (SGX) 65% Fe iron ore futures contract also remained robust on Tuesday, with more than 2,050 lots traded and cleared by 6.30pm Singapore time. This was up from 350 lots on Monday.

Some trader sources said the pick-up in SGX derivatives trading was a result of increased interest among participants in taking positions on grade spreads.

The average spread between the 65% Fe iron ore and the 62% Fe iron ore prices has narrowed over the first three months of the year, from $14.29 per tonne in January to $11.21 per tonne in March.

The second quarter typically marks the beginning of improving downstream market conditions in China compared with the first quarter of the year, largely because of a pick-up in construction activity following the winter lull.

Separately, Brazil’s iron ore export volumes fell 25.9% year on year to 22.18 million tonnes in March, the lowest level since February 2013, according to the country’s foreign trade ministry, MDIC.

Fastmarkets' daily MB 62% Fe Iron Ore Index rose by $1.20 per tonne on Tuesday, while the daily MB 65% Fe Iron Ore Index increased by $1.40 per tonne. The price movements were based on the visible market activity detailed below, which was included in the index calculation according to the published methodology.

For the calculation of the MBIOI-65, judgment was applied to carry over data in today’s indices due to low liquidity in the 24-hour pricing window, corresponding with published fallback measures.

No data was discarded in the calculation of these indices. Any data received under Data Submitter Agreements or subject to a confidentiality request will not be published.

Quote of the day
“With low-and-mid-grade product prices surging higher these days, the price for the high-grade Iron Ore Carajas suddenly seems slightly more attractive, despite being above the $100-per-tonne-cfr mark,” a mill source in Beijing told Fastmarkets.

Trades/offers heard in the market
Vale, Global Ore, 170,000 tonnes of 62% Fe Brazilian Blend fines, offered at $93.50 per tonne cfr China, laycan April 20-29 (bid made at $90.10 per tonne cfr).

Vale, Beijing Iron Ore Trading Center (Corex), 80,000 tonnes of 65% Fe Iron Ore Carajas, offered at $106 per tonne cfr China, bill of lading dated March 22.

Corex, 170,000 tonnes of 61.5% Fe Pilbara Blend fines, offered at the April average of a 62% Fe index at a premium of $1.90 per tonne, laycan March 18-27.

Corex, 170,000 tonnes of 61.5% Fe Pilbara Blend fines, offered at the April average of a 62% Fe index at a premium of $2.30 per tonne, April delivery.

Global Ore, two 170,000-tonne cargoes of 62% Fe Pilbara Blend fines, offered at the July average of a 62% Fe index at a premium of $1.65 per tonne, laycan June 20-July 15 and July 10-31; two 170,000-tonne cargoes of 62% Fe Pilbara Blend fines, offered at the August average of a 62% Fe index at a premium of $1.65 per tonne, laycan July 20-August 15 and August 10-31; two 170,000-tonne cargoes of 62% Fe Pilbara Blend fines, offered at the September average of a 62% Fe index at a premium of $1.65 per tonne, laycan August 20-September 15 and September 10-30.

Port prices
Pilbara Blend fines traded at around 628-642 yuan per wmt in Tangshan city and Shandong province during the day, compared with 618-635 yuan per wmt on Monday, sources told Fastmarkets.

The latest price range was equivalent to $85.50-87.50 per tonne cfr China.

Dalian Commodity Exchange afternoon close
The most-traded May iron ore futures contract closed at 662.50 yuan per tonne on Tuesday, up by 12.50 yuan per tonne from Monday’s closing price.

Deepali Sharma

deepali.sharma@fastmarkets.com

July Zhang

july.zhang@fastmarkets.com

Alex Theo

alex.theo@fastmarkets.com

Published

Deepali Sharma

July Zhang

Alex Theo

April 02, 2019

13:57 GMT

Shanghai, Singapore