Iron ore remains neutral to bullish, with limited room to the upside in the short-run since futures values are converging with DCE deliverable physical values.
Macro: The signing of RECP by 15 Asian countries (Reuters) indicated industrial commodities facing more tax exemptions in next few years. It will also help to build a transparent and fair price market among different member countries.
The Chinese ban on Australia coal imports is expected to be lifted in the new year but iron ore is not expected to impacted before or after RECP.
The announcement of the Moderna Vaccine with predicted 94.5% effectiveness on preventing Covid-19 (Bloomberg) also triggered spikes on both equity and commodity markets.
Steel: The real demand benefits of RECP are yet to be confirmed since most of statements are not officially announced however China steel export orders were booming in October, which might help the growth of steel export tonnage in November and early December.
Domestically, rebar represented 4.65m tonnes of apparent consumption according to MySteel data, creating the second high of the year. The growth also expanded consecutively over the previous four weeks, which potentially drive high inventory levels back to similar levels by end of November last year.
China Blast furnace utilisation rate decreased slower than operation rate. Daily pig iron production stay around 2.45m tonnes for the past three weeks however major mills will have maintenance in the next two weeks.
Iron ore: MySteel puts iron ore port arrivals at 24.34m tonnes, up 515,000 tonnes w-o-w, which was a slight change. Port liftings stayed at 3.15-3.17m tonnes during November. The supply decrease from Australia and Brazil was filled up by cargoes from locations which weren’t counted as inventory before and as a result, port inventories were expected flat in November.
Northern steel mills also control the seaborne iron ore concentrates input since marginal demand is turning weaker seasonally, which would finally cause port inventory pick up in medium term. Northern China mills indicated lump, low aluminium and low sulfur become popular again since mills will need different contents of ores to balance the acid and alkali levels of blast furnace.