Market Commentary
Iron ore futures advanced on Friday after Rio Tinto warned that iron ore supply had struggled to keep pace with consumption. The Australian miner flagged its iron ore shipments this year are likely to be at the low end of its forecast as the world’s top producer and rivals struggle to meet the robust Chinese steel demand. Meanwhile, shipments from Port Hedland jumped to 50.4 million tonnes last month, the second-highest level ever, highlighting the resilient demand for the steelmaking ingredient as global economies recover from the pandemic. Rio Tinto’s second quarter cargoes fell by 2% from the previous quarter. With the major Australian miners all operating at or close to capacity, combined with weather disruptions, there is very little room for growth in supply this year, ANZ analyst Daniel Hynes wrote in a note. While tight supply could boost iron ore sentiment, demand risks could also be looming large for the world’s second largest economy, particularly as it enters its seasonally weak summer period. This could result in a more prolonged period of lower production at a time when China looks to rein in its steel industry and cut emissions. Rio noted that China’s economic growth “was becoming more balanced on fading stimulus-related demand and tightening credit”. China’s crude steel production in June fell for the first time since November 2020 but is still on course to topple last year’s record of 1.05 billion tonnes. “June’s better-than-expected economic data from China are unlikely to allay fears of fading growth momentum. And this could increase downward pressure on iron ore prices,” according to ANZ. “Still, we don’t see a sharp correction in the short term because the market is still tight.”
Futures in Singapore surged to near $215 in early London morning. Aug traded as high as 214.9 early but has since dwindled down to sub-212 before trading up once again to 213.0 and later at 214.0. Cal22 also traded at 164.00 which looked a massive pay at the time. Spreads were all over the place this morning as front-month spreads were smashed while backend spreads appeared to be somewhat resilient. Jul/Sep traded at 10.50 first thing in the morning before trading mostly between 11.00 and 11.25 in decent chunks while Jul/Aug also traded between 5.90 and 6.0. Aug/Sep traded up from 5.1 to 5.2 before traded back down to 5.1/ Sep/Dec also traded at 14.5 while 65% Aug/Sep traded at 6.50 for a couple of clips. Cal 22/23 was marked at 38.1.
Physical Trades
Platform
Corex traded 90,000 mt Fe60.5% JMBF at AM62% Aug Index -$11.40/mt, for Aug 11-20 loading.
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