IRON ORE DAILY: Seaborne prices exceed $100 per tonne for first time since May 2014 [CORRECTED]

Physical iron ore markets continued to strengthen on Friday May 17, with the seaborne price breaching $100 per tonne cfr China for the first time in five years amid bullish futures.

MB 62% Fe Iron Ore Index: $101.71 per tonne cfr Qingdao, up by $2.50 per tonne.
MB 62% Fe Pilbara Blend Fines Index: $99.90 per tonne cfr Qingdao, up by $2.50 per tonne.
MB 62% Fe Iron Ore Index-Low Alumina: $104.48 per tonne cfr Qingdao, up by $1.68 per tonne.
MB 58% Fe Premium Index: $92.12 per tonne cfr Qingdao, up by $3.02 per tonne.
MB 65% Fe Iron Ore Index: $115.60 per tonne cfr Qingdao, up by $2.10 per tonne.
MB 62% Fe China Port Price Index: 716 yuan per wet metric tonne (implied 62% Fe China Port Price $95.63 per dry tonne), up by 19 yuan per wmt.

Key drivers
China’s iron ore futures continued to lead the gains in the ferrous field, with the benchmark September contract ending the week 5.4% higher than the settlement a day earlier, while the January contract even hit the daily trading limit of 6% in the afternoon and closed at that level.

Iron ore stockpiles at 45 major Chinese ports totaled 132.07 million tonnes on Friday, down by 1.24 million tonnes from a week earlier, to the lowest since October 2017, according to a local data provider.

“Otherwise, there seems to be no major fresh news that could justify a further surge [in prices] today, which is totally beyond our expectations,” a mill-affiliated trading source in Beijing told Fastmarkets.

Separately, there was a flooding accident on Friday morning at an iron ore mine in northeastern China’s Heilongjiang province, where rescue work continues while production is suspended. The mine has capacity for nearly 1 million tonnes per year of iron ore concentrate, according to sources.

There could be some supply issues for customers of the mine, but the ultimate effect on the iron ore market will be limited, they added.

Spot transaction prices at Chinese ports rose on Friday in line with the advance in futures during the day, with higher prices in the afternoon than in the morning.

But trading volumes cooled down with the weekend approaching and buyers being more cautious about the jump in prices.

In the seaborne market, two index-linked deals were reported on platforms or via miner tender, while fixed-price offers and bids failed to reach common ground.

Although steelmakers’ margins have been squeezed by increasing iron ore and coke costs, while steel prices have not risen by much, the current profit level of around 500 yuan ($72) per tonne continued to back the prices of iron ore products, especially those with low alumina content, participants said.

Fastmarkets’ daily MB 62% Fe Iron Ore Index rose by $2.50 per tonne, while the daily MB 65% Fe Iron Ore Index increased by $2.10 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.

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
“Steel demand is still intact, with mill production at an all-time high. Coupled with a growth in new projects in China’s real estate industry, these factors have lent support to the rise in iron ore prices recently,” a Singapore-based trader told Fastmarkets.

Trades/offers heard in the market
Beijing Iron Ore Trading Center (Corex), joint cargo, 150,000 tonnes of 62% Fe Pilbara Blend fines, traded at the June average of a 62% Fe index at a premium of $1.70 per tonne, laycan June 24-July 3; 40,000 tonnes of 62.5% Fe Pilbara Blend lumps, traded at the June average of a 62% Fe index and its lump premium, adjusted for Fe content, plus a premium of $1.70 per tonne, laycan June 24-July 3.

BHP, tender, 90,000 tonnes of 61% Fe Jimblebar fines, traded at the June average of two 62% Fe indices, adjusted for Fe content, plus a discount of $2.17 per tonne, laycan June 6-15.

Rio Tinto, Global Ore, 170,000 tonnes of 62% Fe Pilbara Blend fines, offered at $101.20 per tonne cfr China, laycan June 16-25 (bid made at $99.50 per tonne cfr).

Vale, Corex, 120,000 tonnes of 65% Fe Iron Ore Carajas, offered at $117.30 per tonne cfr China, bill of lading dated May 11 (bid made at $114 per tonne cfr).

Spot market, 65% Fe Ukrainian low-sulfur concentrate, offered at the May average of a 65% Fe index at a discount of $5.50 per tonne, May loading.

Spot market, 65% Fe Ukrainian low-sulfur concentrate, offered at the arrival month average of a 65% Fe index at a discount of $4-5 per tonne.

Spot market, 65% Fe Karara concentrate, offered at the June average of a 65% Fe index, June loading (indicative bid level at index plus a discount of $3 per tonne).

Spot market, 66% Fe Minas Rio concentrate, offered against a 65% Fe index (adjusted for Fe content) or the Fastmarkets MB 66% Fe Iron Ore Concentrate Index at a discount of $3.00-3.25 per tonne.

Port prices
Pilbara Blend fines were trading around 703-715 yuan per wmt in Tangshan city and Shandong province during the day, compared with 688-696 yuan per wmt a day earlier, sources told Fastmarkets.

The latest price range was equivalent to $93.80-95.40 per tonne cfr China in the seaborne market.

Dalian Commodity Exchange
The most-traded September iron ore futures contract closed at 707 yuan per tonne on Friday, up by 26.50 yuan per tonne from Thursday’s closing price.


Please note: Fastmarkets’ iron ore indices will not be published on Monday May 20 because of a public holiday in Singapore.


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Editor’s note: An earlier version of this article published on Friday May 17 incorrectly indicated that a joint cargo of Pilbara Blend Fines and Pilbara Blend Lumps was sold by Rio Tinto. This cargo was not sold by the miner.

July Zhang

july.zhang@fastmarkets.com

Alex Theo

alex.theo@fastmarkets.com

Published

July Zhang

Alex Theo

May 21, 2019

05:32 GMT

Shanghai, Singapore