China iron ore prices at new low, sentiment still bearish

Posted on 17 September 2021

China’s iron ore prices for both port inventories and seaborne cargoes have fallen to new lows over recent days, as pessimism about the future ore demand outlook and prices deepens in the market.


On September 14, Mysteel SEADEX 62% Australian Fines declined to $119.75/dmt CFR Qingdao, marking the first time the seaborne cargo price had dropped below $120/dmt since November 6 last year.

On Tuesday too, Mysteel PORTDEX 62% Australian Fines in Qingdao dropped to Yuan 927/wmt ($144/wmt) FOT and including 13% VAT, also a new low since December 3, 2020. The PORTDEX index had already fallen below the threshold of Yuan 1,000/wmt on September 8.

“The market is rather bearish now, with steel mills strictly controlling their steel production, so iron ore demand from steel mills is quite sluggish, and the ore trading volumes in the spot market are low,” a Jiangsu-based iron ore trader in East China commented, adding that it’s not surprising that ore prices are trending south.

China’s major steelmaking provinces such as Hebei, Jiangsu and Shandong are all requiring local steelmakers to control output in response to Beijing’s pledge to lower steel production for 2021. In fact, Jiangsu expects to further reduce local steel output by directing mills in the province to reduce their power use as well, as reported.

According to the latest data from the country’s National Bureau of Statistics, last month China’s crude steel output fell more sharply by 13.2% on year to 83.2 million tonnes, while daily crude steel output was the lowest since April 2020. Average per-day production was down for the fourth straight month and by another 4.1% on month at 2.69 million tonnes/day, NBS noted.

A Zhejiang-based iron ore trader in East China also confirmed that these days, ore procurement among steelmakers is rather constrained. “Steel firms that have surplus tonnage from their long-term deal supplies are constantly re-selling stocks at hand, but it is still hard for them to conclude deals,” he said.

“Most mills are very conscious of their in-house iron ore stocks and are only buying tonnage in the market when really necessary – to minimize their exposure to pricing risks,” he added.

Significantly, the Zhejiang trader said that so far, he hasn’t observed any steelmakers lifting ore purchases to build inventory to ensure their production is smooth during the coming Mid-Autumn Festival over September 19-21 and the National Day holiday over October 1-7.

“The port inventories are relatively ample now, so many steel mills don’t see any need to buy additional stocks so early. And even if the pace of procurement increases, any support this lends to ore prices might still be limited,” he explained.

Mysteel’s data showed that as of September 9, stocks of imported iron ore at 45 Chinese ports stood at 130.4 million tonnes, higher by 4.1 million tonnes on month and also 15.8 million tonnes higher than the corresponding period in 2020. Meanwhile, some ports are still experiencing serious congestion, with some 185 iron ore vessels queuing at the 45 ports for unloading as of the same day.

The Zhejiang trader also noted that he has no iron ore stocks at hand now. The volatility of prices these days makes it so hard for him to do business, he explained, as it is for so many other small- to medium-sized ore traders.

“For the longer term, it is still hard to see any substantial revival in iron ore demand from domestic steelmakers, as the steel production curbs are very likely to be strengthened, especially in Q4 when winter controls on industrial activities to reduce atmospheric pollution are normally imposed in North China,” the trader predicted. “It’s really hard to forecast where the bottom for ore prices is for now as it depends on the government’s policies.”

Source : Mysteel Global