Market Commentary
Iron ore futures remained well-supported amid robust Chinese demand while a weaker dollar also supported the dollar-denominated iron ore prices. Mills in China continued to churn out steel at record pace despite government attempts to rein in output from last year’s record of over 1 billion tonnes. According to the latest figures released by China’s statistics bureau, crude steel production in April rose 13.4% year-on-year to 97.85 million tonnes. At the same time, rebar and iron ore stockpiles continued to dwindle, indicating strength in demand. Iron ore had endured a rollercoaster week last week, with authorities in China stepping up efforts to tame the surging commodities prices, which saw prices pummelled from the historical high of $233 to around $195 in a matter of day. The government intervention led to an exodus of speculative funds from some of the mainstream industrial products. To put it into perspective, Chinese industrial commodities’ open interest fell by 8.4% from 27 April.
Meanwhile, Beijing is looking to alleviate its reliance on Australian iron ores as trade tensions between the world’s largest iron ore consumer and producer are once again in the spotlight. Chinese firms should boost domestic exploration for the steel-making input, widen their sources of imports, and explore overseas ore resources, the National Development and Reform Commission said at its monthly briefing. This came after China “indefinitely” suspended all activity under a China-Australia Strategic Economic Dialogue less than two weeks ago.“While an outright ban would be almost unimaginable, various forms of restrictions, delays or increased administrative burdens on Australian iron ore imports could yet happen,” Wood Mackenzie said in a recent note.
Dollar-denominated commodities, such as iron ore and copper, also appears more attractive to holders of other currencies as the US Dollar Index (DXY) fell below a critical support level of 90.00. The greenback was under pressure as treasury yields stalled due to expectation that the US interest rates will remain low for an extended period following comments made by Dallas Federal Reserve President Robert Kaplan. There is also expectation among some market participants that fresh and harsher production curbs may be in place in the summer.
Futures in Singapore remained supported above $214 for most of the morning. Jun was seen trading from 214.2 to as high as 214.65. It then eased off a touch to 213.9 before once again trading above $214. Spreads were a touch narrower, with Q4/Q2 trading as low as 22.7. Cal22/23 was marked at around 29.0. May/Jun also traded at 1.5 while Jun/Jul was heard trading at 5.5.
Physical Trades
Platform
Vale, Globalore, 170,000 tonnes of 65% Fe Iron Ore Carajas fines, traded at $258.70 per tonne cfr China, bill of lading dated May 15.
Beijing Iron Ore Trading Center (Corex), 170,000 tonnes of 61% Fe Pilbara Blend fines, traded at $219.50 per tonne cfr China, laycan June 9-18.
BHP, Globalore, 80,000 tonnes of 62% Fe Jimblebar fines, traded at the July average of two 62% Fe indices plus a premium of $2 per tonne, July arrival.
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