Iron ore price rally may reverse soon

Exclusive

17 October 2016

Iron ore benchmark indices swung back above $57 per tonne cfr last week. Iron ore prices strengthened on the back of rising futures on the last day of the week closing 14^th October. Indices moved up by $0.6 per tonne on Friday to close at $57.28 per tonne cfr Qingdao. The month to date average of a leading index was recorded at $56.26 per tonne on week closing for 62% Fe fines.

The question now arising is if there is still headway left for iron ore in the coming weeks. In the last week iron ore prices moved up but the weekend doubts have already started to emerge if any further upside is still possible.

Sources from China revealed that China has almost completed its restocking cycle post holidays and margins continue to hold  thin for mills in the country. Though, the winter stocking is going on in some of the northern most parts of the country, the overall scenario suggests the downhill journey for iron ore prices hereon.

Cyclone season in Australia towards the year end is one factor which may help the prices to retain momentum but again in between time the prices would have lost the Chinese buying support.

However, trading was not very active, with it being the last working day of the week. Buyers were reluctant to accept higher prices, the sources added.

Speaking to few traders from Shanghai, it was learnt that the current trade was not healthy and not backed by any fundamental development in the commodity. It was just a restocking cycle of the mills after holidays and was an expected event which would last a week or two at the max.

Another trader from Tianjin added that the mills looking to restock for winters will wait for these prices to cool down before they engage in new trade.

One transaction reported and talked in the market was Rio Tinto’s 190,000 tonnes 61% Fe Pilbara Blend fines which concluded at $56.56 per tonne cfr China with a laycan of end October. Market sources indicated the transaction to be at a premium of $0.45-0.50 per tonne to prevailing levels.