Market Verdict：
– Iron ore short-run neutral to bullish.
Macro Market Change and Money Movement:
– The correction on both oil and coal symbolized the speculation of energy risk temporarily cooled. The headlines over weekends were contributed by the pilot version of China real estate tax came out. Major macro analysts from Asian based securities believed that the new tax policy turned and end of house speculation, and the relevant investments potentially shift to equity and commodity market according to the main economies including U.S. and Japan. However the prediction potentially become more uncertain under the background of a global wide pandemic. The suddenly increased production on new coal miners and major state-owned miners in China boosted the supply of coal more than 10% compared to September, expected to resolve the shortage of coal in Q4.
Iron ore Market :
– China 45 ports iron ore inventory up 976,400 tonnes, which was very close to the previous two years level as a normal stock after the biggest holiday of the year. However the ships waiting at ports reached 204, the yearly high, indicated the port congestion was severe. The winter production curb would bring back the demand of high grade ores and lumps demand in the next two months.
– The Iron ore swaps spread was in a historical low area, however the 0 growth rate on crude steel making would decrease some speculative demand on iron ores before year-end. Which is to say, the Dec21 contract potentially become a weaker contract, and Jan22, Feb22 and Mar22 at least maintain stable or strong because they are not related to and restricted by the production restriction.
Steel Market:
SGX iron ore futures Nov-Dec spread narrowed massively from $2.8 seen in mid-October to $1.45 during this Tuesday, after a huge correction, which historically would squeeze spread narrower. When spreads hold-up or slight rebound, outright potentially rebound fast according to previous market. DCE entered a delivery sentiments approaching December. The DCE based iron ore value started to get close to the cheapest-to-delivery brands, which could be SSF. However SGX iron ore currently represent the last two months of steel mills real demand, which looked resilient as a result. In short-run, iron ore potentially recovery the previous oversold.
Coal Market:
China National Development of Reform Commission arranged several researches and conferences to major state-owned coal companies to discuss the coal production increase and guarantee the livelihood consumption of coals and electricity. The early October daily coal production reached 11.5 million tonnes, up 1.5 million tonnes compared to September, this daily production number also created a two-year-high. Some coal miners in western area has decreased the prime coal price by 500 yuan/tonne over the week. The mutual factors including the end of major railroads, completion of roads maintenance impacted by floods, safety inspection, and new entered production, have all become a pull back force against the historical high coal prices.