Market Commentary
Iron ore futures were largely unchanged at just under $185 on Friday. The steelmaking ingredient has had a rollercoaster ride this month, with prices surging above $230 at the start of the month amid a global steel boom, exacerbated by China’s commitment to rein in last year’s record 1 billion tonnes of output. The rising commodities prices drew the attention of the Chinese government, with Chinese Premier Li Keqiang demanding more efforts to be taken to prevent rising commodity prices from being passed through to consumers. Following the Premier’s remarks, authorities in China have since warned of a crackdown of illegal behaviours, such as price manipulation, hoarding and monopolies in spot and futures markets. Executives from the steel and iron ore industry were also summoned for talks last weekend. Iron ore prices plummeted near its 100-Day moving average early this week before rebounding to around $184 yesterday.
There are also signs that China’s robust demand is somewhat faltering as the rainy season is fast-approaching. Total rebar inventory had the slowest drawdown of stockpiles in over two months this week. Apparent consumption of the five major steel products (rebar, wire rods, HRC, CRC and Plate) was down for a second week to 11.03 million tonnes this week. Iron ore inventories were also up this week by 1.12 million tonnes to 126.22 million tonnes, the latest data by Mysteel showed.
The crackdown in commodity prices as well as the upcoming rainy season have led to some cautious trading in the physical market as traders expect steel demand to soften in the coming weeks. There has been some interest in the low-grade fines from the narrowing of steel margins, but most buyers are still thought to prefer mainstream fines such as PBF.
Futures in Singapore are largely unchanged but was not without drama. Iron ore was under pressure in early London, with Jun traded down to 178.9 and eventually at 178.0. Then it rebounded strongly, reversing all the losses, as Jun traded up to 184.75. Front-month spreads followed a similar pattern, narrowing a touch early on before widening back as market recovered. Q3/Q4 was marked at 14.45 and Cal 22/23 at 26.0. Jun/Jul traded 6.05 while Aug/Sep traded at 5.1 and Jun/Q3 at 11.35 in decent size.
Physical Trades
Platform
BHP, Globalore, 90,000 tonnes of 62% Fe Mining Area C fines, traded at $182.50 per tonne cfr China, July arrival.
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https://fisapp.com/wp-content/uploads/2021/05/Iron-Ore-Report-28052021-Eng-Chn.pdf
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