Spot iron ore shows late gains in the week buoyed by steel and futures



5 February 2018

Buoyed by marginal increases in the Chinese spot steel market and gains in the paper market helped sea-borne iron ore to inch up again towards the $75/mt mark, in the latter half of the week. Sentiments also played part as the news of Tangshan extending production curbs beyond winters kept rounds, while the province has denied it.

Taking a look at the benchmark iron ore prices, Metal Bulletin’s 62% Fe Iron Ore Index closed the week at $74.39/mt CFR China, depicting a daily upside of $1.51/mt. The index almost closed the week at the same levels as it ended the previous one, despite losing as much as 2% in the first three days. Metal Bulletin’s 58% Fe Premium Index for Iron Ore ended at $59.47/mt.

Fundamentals

Seemingly, the steel market still has demand for some products and it is expected that the market prices are likely to go up in the coming days. Also, if the rumours regarding extension of production curbs in Tangshan are to go by, there could be some more gain in offing. However, Hebei’s provincial government denied reports it had sought an extension.

Chinese steel mills have indicated that the current iron ore stocks could maintain normal production for 25-30 days or so. Thus, it is most likely that the mini rally experienced towards the end of the week was a technical recovery and prices can come under pressure as the Chinese holidays are approaching.

Futures Market

Futures in China saw upsides for most of the steel and steelmaking commodities as the key drivers kept showing positive trend on the last couple of days of this week. On Friday, China Securities Regulatory Commission (CSRC) reported by Reuters suggested that China’s Dalian Commodity Exchange will allow foreign investment in domestic iron ore futures trading.

The most-active steel rebar contract for May delivery on the Shanghai Futures Exchange closed up 0.5% at 3,961 yuan ($632) a tonne. Moreover, the key coking coal contract jumped 2.9% to close at 1,331.50 yuan a tonne.