Chinese spot iron ore fines (Fe 62%) index dropped to USD 87.1/MT, CFR China, as on 16th Oct’19. The prices fell by almost USD 5/MT D-o-D as against USD 92.05/MT, CFR China as on 15th Oct’19. The prices have witnessed 1.5 months low as it was last witnessed at USD 86/MT towards end of Aug’19. The drop is attributed to reduced demand amid increased production curbs in China. This has resulted in shift towards high grade ore and lumps.
Why have Chinese spot iron ore prices dropped down?
1.Falling Demand
Iron ore demand in China has witnessed a steady fall amid rising production curbs. China’s top steelmaking city of Tangshan this week has issued second level pollution alert which will limit production further. Also, a week before, mills in Tangshan were ordered to reduce sintering, pelletizing and blast furnace operations from Oct. 10 until Oct. 31. According to Mysteel consultancy ,out of Tangshan’s 33 steelmakers, 30 have already halved sintering, pelletizing, lime kiln and blast furnace operations since Oct. 10.
2. Easing Global supplies
The iron ore prices have weekend also due to easing global material supply. Vale – world’s largest iron ore miner reported 35% increase in iron ore production for the quarter to 86.7 MnT amid resumption at Brucutu mines and partial resumption of the dry processing operations at the Vargem Grande Complex. The miner expects to lift production in 2020 and 2021. Also, supply from major miners in Australia reported rise for the quarter.
3. Rise in Iron ore inventory
As per data compiled by SteelHome consultancy, iron ore inventory at major Chinese ports picked up to 129.95 MnT as on 8th Oct as compared to 125.55 MnT a week ago. The iron ore inventory reached almost 5 months high as the level were last witnessed towards mid May at 131.7 MnT.
Spot pellet premium up W-o-W
Spot pellet premium for Fe 65% grade pellets assessed at USD 23.15/MT, CFR China as against USD 17.65/MT, CFR China assessed a week ago. The approaching winter curbs in China has resulted increased preference of pellets over lumps.
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