WEEKLY: China's domestic iron ore prices bottom out

Though most domestic concs suppliers clipped their offering prices further last week in keeping with their rather pessimistic outlook for the ferrous market, the strong rises in iron ore derivatives prices lent some support for spot prices later, Mysteel Global learned.

As of March 22, the most-traded iron ore contract for May delivery on the Dalian Commodity Exchange closed at Yuan 844/dmt ($118.7/t), higher by Yuan 59/dmt or 7.5% from the settlement price of March 18.

Also by last Friday, the offering price of 66% Fe grade iron ore concentrates in Handan and Xingtai in North China's Hebei province had dropped by Yuan 83/dmt on week to reach Yuan 967/dmt excluding the 13% VAT, before subsequently rebounding to reach Yuan 980/dmt by March 25, according to Mysteel's assessment.

"Concs suppliers across the country generally started to raise their quotations last weekend after seeing the gains in futures prices," a market analyst based in Shanghai explained.

On the other hand, steelmakers' buying interest in domestic iron ore strengthened as the mills were ramping up production in response to recovering steel demand among end-users, the analyst added.

During March 15-21, the four-week drop in capacity utilization among the 247 blast furnace steelmakers Mysteel tracks nationwide ended, with the rate edging up 0.21 percentage point on week to reach 82.79%, the survey findings showed.

The brighter market mood and improved fundamentals for steel have provided upward momentum for concs prices in most regions in China, the Shanghai analyst observed, predicting that prices are likely to keep rising this week.

Table 1: China's iron ore concentrate offering prices in major production bases March 22

Table 2: China's steel mills' procurement prices in major areas March 22

Written by Anthea Shi, shihui@mysteel.com

Edited by Russ McCulloch, russ.mcculloch@mysteel.com