China: Iron Ore Fines Prices slump to 5 Years Low

Chinese spot Iron ore Fines prices of grade Fe 62% slump to USD 84/MT CFR China and Fe 58% Fines is at USD 64/MT CFR China. Prices have fallen to 5 years low.

Indian exporters are worst hit as exports from India remain absolutely nonviable and market experts foresee the situation to remain awful in the forthcoming months.

Already burdened with expensive plot rents at various ports, 30% export duty and high railways freight charges the growing supply from Australia & Brazil and quite low Chinese Fines prices, have made exports non viable.

To prevent cancellation of plots at various ports, allotted to Indian exporters at a very high price, 0.39 MnT ore was exported at lower margins in Aug’14, in contrast to 0.22 MnT in Jul’14. Since Apr’14 (0.95 MnT) exports fall by 59% in Aug’14.

What has pulled down Prices at 5 Years Low?

Huge Iron ore exports from Australia & Brazil in the past 8-10 months, which stood at an average of 75 MnT per month, is primarily to be blamed. Australia is pushing nearly 50 MnT and Brazil around 15 MnT every month to Chinese importers.

Now, expecting an additional 10 MnT Iron ore export from Brazil from September onward. China will be importing about 75 MnT per month from the two countries alone.

World’s Leading Miners’ Iron Ore Production (MnT)

(E)-Expected
Source: SteelMint Research

Is it a Situation of Oversupply?

In the 1^st half of 2014, 132 MnT Iron ore is oversupplied in the world.

A question arises – Is China being oversupplied with Iron ore when the country plans to produce additional 5-7% crude steel in 2014 and reach beyond 800 MnT?

In China, around 50% of domestic Iron ore mines remain non-operational because of drastic turn down in prices and escalating imports.

Can Prices go down further?

Until & unless the three major players namely Rio Tinto, Vale and BHP Billiton lessen the supply quantity for about 2-3 weeks, market will see no respite. Market participants believe that prices may correct further to nearly USD 80/MT CFR China.