Iron Ore Market Update
Market Commentary
Iron ore futures remained subdued as falling steel output kept pressure on the steelmaking ingredient. China’s crude steel production continued to fall as a result of the ongoing output cuts. Daily crude steel production fell by 1.2% to an average of 2.96 million metric tonnes per day over the 1-10 August period, data by Mysteel showed. Crude steel production could remain low through till the end of the month due to power-saving measures in the Guangxi, Guangdong and Sichuan provinces. These power-saving measures are estimated to reduce steel production by around 27,000 metric tonnes per day. Sharp steel output reductions are also expected in the steelmaking hub of Tangshan. Platts estimated that its annual crude steel output would be cut by 14.2 million metric tonnes in 2021. Meanwhile, authorities in China are said to continue roll out fiscal and tax policies aimed to promote a green and low-carbon future. Some experts suggest that a new carbon emission tax, which incorporated the existing environmental protection tax along with tax on refined oil consumption and coal, could be implemented. Meanwhile, there is a possibility that iron ore is facing supply headwinds. Guidance from Rio Tinto and Vale suggest that they will lift output in the second half, UBS Group AG said in a note. “We are cautious on iron ore prices medium term as supply is lifting and demand is moderating,” UBS analysts including Myles Allsop said in the note that forecast prices would drop below $100 a ton next year. “We expect prices to stabilize in September, October before continuing to fall back.”
MySteel Rebar Inventory:
Rebar production 3.21 million tonnes, up 0.97% w-o-w.
Mills inventory 3.4 million tonnes, up 1.07% w-o-w.
Circulation inventory 8.06 million tonnes, down 1.15% w-o-w.
Trading remained light in London morning, with Sep trading between 158.75 and 159.75 for much of the morning. Spreads were, however, crushed again as it was heard Q1/Q2 trading as low as 9.7, compressing the backend spreads and Cal22/23 to around 31.0. Sep/Jan traded at 15.0 while Sep/Nov and Sep/Dec traded at 7.1 and 10.85.
Physical Trades
Platform
Vale, Globalore, 170,000 tonnes of 65% Fe Iron Ore Carajas fines, traded at the September average of Fastmarkets’ index for iron ore 65% Fe Brazil-origin fines, cfr Qingdao plus a premium of $4.40 per tonne, bill of lading dated August 10.
Beijing Iron Ore Trading Center (Corex), 170,000 tonnes of 61% Fe Pilbara Blend fines, traded at $158.40 per tonne cfr China, laycan August 31-September 9.
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