Market Commentary
Iron ore futures surged more than 10% on Monday amid robust Chinese demand as well as optimism over global economic recovery, while the bilateral tensions between Australia and China also helped fired up the steelmaking ingredient. According to the China Iron & Steel Association (CISA), Chinese mills’ daily crude steel production went up by 2.3% to 3.12 million mt per day over the second half of April. The rising daily output was unaffected by the week-long holiday in China as steel mills were busy with pre-holiday restocking activities. Meanwhile, Chinese mills’ scrap utilization for crude steel production had also increased in April, with monthly increase of 0.98% to an average of 25.38% for electric-arc-furnace (EAF), according to Mysteel. Restocking activities from Chinese mills continued after the holiday period as many mills are sweating over the escalating tensions between China and Australia after China unilaterally suspended all activity under a China-Australia Strategic Economic Dialogue indefinitely. In addition, there are growing expectations that China will further tighten its environmental rules which fuelled speculation that steelmakers may front-load iron ore purchases before the new curbs kick in. The swath of production curbs imposed have so far failed to rein in supply but boosted prices and profitability at mills, allowing them to better accommodate higher iron ore costs and potentially front-load production ahead of more environmental curbs.
Furthermore, rebounding demand from the manufacturing and construction sectors outside of China have also picked up this year as the opening of economies around the world have sparked a surge in demand in commodities. “There is a chance that ex-China demand can come back to such an extent that we still see steel demand pick up globally and that will see iron ore demand to remain at these elevated levels”, Vivek Dhar, commodities analyst at Commonwealth Bank of Australia said in an interview with Bloomberg Television. Analysts at CISA, however, warned that it will be difficult for steel to continue rallying as ship makers, household-goods manufacturers will eventually be unable to withstand the elevated prices, according to a Xinhua report on Sunday. Tangshan billet prices, often seen as the bellwether of steel demand, jumped 280 RMB over the weekend to around 5,500 RMB/mt before gaining a further 150 RMB to 5,650 RMB on Monday.
Futures in Singapore surged by over 10% to trade as high as $226.5 in Asia before easing off a touch. In London, iron ore remained well-supported above $222 in the morning. Jun was seen trading up from 223.5 to 225.0 before easing off to 222.1. Cal 22 also traded at 165.5. Spreads went wild with Q3/Q4 as wide as 15.6 while Cal 22/23 was marked at around 30.5. Jun/Jul traded at 5.9 while Oct/Nov traded at 4.85. May/Jun also traded at -2.50.
Physical Trades
Platform
Corex traded 190,000 mt PBF at the average of Platts 62% index in Jun +$6.50/mt for Jun 1-10 loading.
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Iron Ore Report 10052021 Eng & Chn
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