Chinese prices for imported iron ore soared to 10-year highs in response to market optimism: for example, 62% of Australian Mysteel SEADEX fines reached $ 187.85 per ton CFR Qingdao on April 20, a new record since March 2011 of the year.
On April 20, the most traded iron ore contract on the Dalian Mercantile Exchange (DCE) for September delivery rose for the fourth straight session, climbing 38 yuan /dmt, or 3.6% from the previous settlement price, to close the afternoon trading session. at 1,100 yuan /dmt, according to DCE.
“The market sentiment is more bullish right now,” commented a Shanghai iron ore trader. “In my opinion, high steel prices and profitability have been the main drivers behind the growth in iron ore production,” he said.
Domestic steelmakers now have incredibly high profit margins on steel, he said, with profits on some finished steel falling to RMB 1,000 per tonne. In this context, higher raw material prices are not a big problem for mills when they manage their production activities as intensively as possible. “In fact, the current growth in iron ore production is intended to catch up with the previous round of steel price increases,” the analyst added.
Another iron ore analyst from the Shanghai Futures Company also noted strong demand for iron ore from domestic steel mills at the present time. “In particular, steelmakers are consuming more medium to high iron ore products, fueled by improved steel margins and that they are facing increased attention to chimney emissions,” he said. “And all this is in conditions when the supply of such types of iron ore products is simply stable. So why should iron ore prices fall? ” he asked.
Mysteel’s latest data also confirmed that domestic steel mills have been performing poorly recently, with blast furnace utilization among 247 domestic steel mills regularly surveyed growing during the second week of April 9-15, rising another 0.72 percentage points to 87. 67%. This is despite the fact that many steel mills in Tangshan are still marking time due to tight production restrictions, reportedly.
The iron ore analyst also noted that the boom in demand for iron ore around the world amid recovery in steel production in other parts of the world is also driving iron ore prices up. “Increased demand for ore from steel companies around the world could reduce the overall availability of iron ore, which will then affect the Chinese iron ore market, where the supply may not be as large as it was,” he said.
On the back of rising prices, iron ore trading in the Chinese spot market has also been relatively active in the past few days, which in turn has supported spot prices, Mysteel Global said.
“As the five-day Labor Day holiday approaches (May 1-5), some steel mills must purchase additional ore to ensure continuous production of pig iron during this period,” said an iron ore trader from Shandong. , adding that the participation of iron ore traders in speculative trading has also intensified recently.
Mysteel Global notes that iron ore trading is usually temporarily suspended during Chinese official holidays.
Some market sources have also indicated that the optimistic sentiment for iron ore futures stems from the fact that currently, China’s central government has yet to announce any further detailed measures to cut crude steel production this year, only that production in 2021 should not exceed the overall figure for 2020. 1.065 billion tons.
However, the relevant Chinese government authorities have now been alerted to the recent spike in commodity prices, including steel and iron ore.
Only on April 19, Meng Wei, spokesman for the National Development and Reform Commission (NDRC), commented at a press conference that “for industrial goods, prices will generally remain stable in the coming months as China has sufficient production capacity, abundance supply and sufficient market competition ”.
But this was not convinced by a second iron ore trader from Shanghai. “In my opinion, the current market is a little crazy. Of course, the fever may subside a little after the impulse reaches its peak, but I don’t know when it will happen yet, ”he admitted.