Market Commentary
Iron ore futures slumped to the lowest in over a month over renewed concerns of a crackdown on commodity prices by authorities in China. Policymakers in China have found themselves in a very delicate conundrum as they look to maintain its economic growth but at the same time are concerned that a cost-push inflation could dent economic growth in China and beyond. Messages from authorities in China have been somewhat mixed. On one hand, the National Development and Reform Commission said after executives from iron ore, copper, coal and aluminium companies were called to a meeting on Sunday that the government will show “zero tolerance” to monopoly behaviours and hoarders and vow that those violations will be severely punished. On the other hand, during a visit to a major port terminal in Zhejiang province on Monday, Premier Li Keqiang urged the strengthening of commodities imports, storage, and transportation, the State Council said in a statement. Investors took Li’s comments positively as an indication that China may boost global purchases of industrial metals to meet domestic demand and stave off inflation, resulting in a rebound in industrial commodities such as copper and iron ore on Tuesday.
Things, however, took a turn for the worse on Wednesday as iron ore fell by as much as 7% to as low as $171. Some observers in China say that the Premier was merely talking about improving port logistics and not giving a green light for boosting imports, which could offer fresh support to international prices. “There’s been some misunderstanding from overseas investors”, Ju XIanfei, an analyst with Guotai Junan Futures Co., said during a telephone interview with Bloomberg. The remarks only showed the country’s commitment to improve import logistics to ensure supplies, he said. There is also some concern that the booming demand for iron ore is faltering. According to the latest Ganggu Construction steel inventory data, mills’ inventory was up 499,200 tonnes this week to 164,000 tonnes. It was the first weekly increase since March, a sign that destocking on steel might have hit a snag and may slow down in the coming weeks. Furthermore, Investment bank Morgan Stanley said that China’s record steel output has been achieved by a surge in scrap use, which is outpacing iron ore consumption growth. The American bank said that it is an indication that the demand for the steelmaking ingredient may have passed its peak.
Futures in Singapore fell sharply during London morning. Jun held above $181 prior early morning DCE open but fell sharply after session began. Jun was seen sold down to as low as 171.3 before rebounding to trade as high as 177.1. Iron ore then tanked again, with Q3 leading the charge as it was sold down from 165.75 to 161.0. Meanwhile, Q4 was also sold down from 148.75 to 147.0 and Jun traded down to 172.2. 65% Jul traded several clips at 196.1 with the Jul 65/62 quality spread around 29.0. Spreads were much narrower, with Cal 22/23 around 27.0. Q3/Q4 did trade 14.0 but since narrowed a touch to 13.9. Q4/Q1 was heard trading 11.95 while Jun/Jul traded at 5.75 in early morning before spreads got compressed.
Click below link to open today’s Singapore Iron Ore Report
https://fisapp.com/wp-content/uploads/2021/05/Iron-Ore-Report-26052021-Eng-Chn.pdf
For more information please contact
FIS Iron Ore Desk
ferrous@freightinvestor.com
London Number +44 (0) 207 090 1120
Singapore: +65 6535 5189
Shanghai: +86 21 6335 4002