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WRAP-UP: Ten major news in China 2019 iron ore market - 2

The rather eventful 2019 for China’s iron ore market is approaching its end, and in retrospect, this year has been full of surprises both in demand and supply as well as in prices for the market participants. Mysteel Global has listed the ten major happenings in the market according to our own understanding.

Link to the part 1

5. China’s industrial association alerted on soaring iron ore price

The soaring iron ore price in 2019 has seriously compromised Chinese steel mills’ capability of profitmaking despite a substantially rise in the steel output as well as the overall stable steel prices.

For July, the average margin obtained in making rebar among the 91 integrated steelmakers in China against Yuan 166/t in the previous month, according to Mysteel’s monthly survey, mainly because of the seaborne 62% Australian iron ore fines shooting up to its nearly 5.5-year of $127.15/dmt on July 3. 

The China Iron & Steel Association (CISA), as the representative of China’s medium and large-sized steel mills, therefore, called for market attention on the serious slump in steel mills’ profitability, and Qu Xiuli, vice chairperson of CISA disclosed at an industrial event on July 5 that the association had got in touch with related governing bodies in China, lobbying the government to intervene, checking the cause of the abnormally high iron ore prices and seriously penalizing any illegitimate or manipulated iron ore trading if discovered. 

Lv Guixin, a senior official from the Raw Material Dept of China’s Ministry of Industry and Information Technology (MIIT) shared at the Mysteel Bulk Commodities Week 2020 forum on December 14 in Shanghai that MIIT, together with the related industrial associations, will be closely monitoring imported iron ore prices in 2020 to safeguard the normal order in the Chinese steel market as well as to enhance transparency in the iron ore trading and to strengthen China’s pricing power in the seaborne iron ore market. 

6. Global iron ore miners tested out Yuan-priced iron ore trading

In 2019, three of the world’s top four iron ore miners have explored the Yuan-priced iron ore trading in China’s market either on the e-trading platform or offline sales as part of the efforts to accommodate the needs of the Chinese steel mills as well as to add new pricing models to better serve their primary market and to maximize their profit making. 

Rio Tinto sold its first Yuan-priced deal of 10,000 tonnes of 59% grade SP10 fines, a non-mainstream product, to Hebei Gaoyi Steel on October 11, with the delivery port being Rizhao in Shandong, East China. 

Shortly afterward on November 21 FMG concluded its first Yuan-priced deal of 10,000 tonnes of 57.2% FMG Lumps at the Caofeidian port in Hebei of North China on the Beijing-based e-trading platform COREX.

In early November, Vale sold the first shipment of the Yuan-priced Brazilian Blend Fines (BRBF) to Shandong Yongfeng International Trade Co against the May 2020 iron ore futures price on the Dalian Commodity Exchange with a premium/discount (premium or discount) with the delivery port being Qingdao port of Shandong by November.

Besides the added flexibility in pricing, iron ore miners have moved their blending to Chinese ports to better cater to the appetites of the end-users with the Chinese steelmakers in particular.

Rio Tinto, for example, launched its new product – the Rio Tinto Blend Fines (RTBF) in China in November for the first time, and the blending took place at the Tangshan Caofeidian Shiye Port in North China’s Hebei province. 

In December, Anglo American also produced its new blended iron ore product at the Caofeidian port of Tangshan, Hebei province.

For the first quarter of 2020, Vale will be able to deliver its first iron ore grinding product dedicated for Chinese users – ‘GF88’ – at Shulanghu iron ore terminal in Zhoushan, East China's Zhejiang province.

All these are providing the Chinese steel mills with greater choices of products and pricing schemes, indicating the major miners’ highly valuing their primary customer base and their great willingness to maintain coherent business relationships with Chinese steel mills.

(More details please read FEATURE: Foreign miners tailor more ores for China mills via the link:

https://www.mysteel.net/article/5012414-05/FEATURE--Foreign-miners-tailor-more-ores-for-China-mills.html)


7. China’s DCE launched iron ore options

To increase the liquidity and as part of the efforts to achieve the continuity of the iron ore futures trading, the Dalian Commodity Exchange (DCE), the world’s only iron ore futures trading platform with physical deliveries headquartered in Dalian, Northeast China’s Liaoning province, added options on December 9 to enrich its iron ore derivatives package.

The trading volume up until December 26 was encouraging, totaling 628,142 lots as against the 28.7 million lots for futures, or steadily growing from its first-day trading at 52,350 lots, all in double counting, according to the DCE official data,

Since its launch of the iron ore futures on October 18 2013, DCE has been beefing up the efforts to enhance its popularity both inside and out of China and strengthen its role of price discovery.

The launch of the options was another achievement along the line after May 8 2018 when DCE was granted the approval by China’s Securities Regulatory Commission to allow overseas institutional investors to register accounts for the DCE trading via overseas brokerages and ultimately through China’s futures companies, with the daily settlement to be fulfilled either in the Chinese Yuan or the U.S. dollar.

Link to the part 3

Written by Victoria Zou, zyongjia@mysteel.com, Fangwei Lin, linfangwei@mysteel.com and Zhiyao Li, lizy@mysteel.com
Edited by Hongmei Li, li.hongmei@mysteel.com