Iron ore futures recovered from yesterday’s blip to trade above $95 as investors become increasingly concerned over the coronavirus crisis in Brazil.
Brazil’s iron ore shipments had their slowest start to a year in the last five years. Brazilian miner Vale downgraded its production guidance early in the year, Morgan Financials Ltd noted that more downgrades could be on the way as the coronavirus situation worsened in key mining provinces.
Meanwhile, the trade tensions between Australia and China appears to be escalating, after China tweaked its iron ore import procedure that could disfavour Australian cargoes. The ANZ Group however believed that the recent rally looks increasingly stretched due to difficult conditions in the steel industry outside China.
Both Morgan Financials and ANZ noted that any stimulus announcements – or a lack thereof – at the Two Sessions meeting will be a catalyst for the market. Some physical traders are thought to be more cautious in procurement over concerns over steel margins. The iron ore port markets have seen very light bids over the past few days as traders are expecting a correction.
Meanwhile, China announced that it will tweak its iron ore import procedure, with some analysts suggesting that it could be used to block Australian cargoes. This new inspection process is well received by miners who believe that it will streamline shipments. “We’re supportive of the changes to the iron ore inspection process and believe it will create a more efficient supply chain for producers like us as well as our Chinese customers,” BHP said, noting that the new process was in the works for some time.
Iron ore futures in Singapore rallied strongly during the early London morning DCE session. Jun was seen trading up from around 94.2 to as high as 95.5. Jul traded up from 92.25 to 93.2 while Q2 also traded up from 78.6 to 79.1. Q3 and Q4 also traded 90.9 and 84.75.