Imported iron ore prices in China have slumped by nearly 30% over the past month, and on Wednesday, prices took another tumble to their lowest levels since March as the gloomy mood deepened.

On August 21, Mysteel’s 62% Australian iron ore fines price index for seaborne cargoes slumped by another $5.5/dmt on day to settle at $83.05/dmt CFR Qingdao, the lowest since March 11, while the price of ore of the same grade and origin at the ports also dropped by Yuan 22/wmt on day to reach Yuan 710/wmt FOT Qingdao including 13% VAT, the lowest since May 26.

On the same day, the most-traded iron ore futures contract on the Dalian Commodity Exchange (DCE) in North China – that for delivery in January 2020 – also fell for the fifth straight session, with the futures price finally ending daytime trading at Yuan 589.5/dmt ($83.46/dmt), down another Yuan 26.5/dmt or 4.3% from Tuesday’s settlement price.

“The bearish market sentiment still dominates, with no good news on either the demand or supply sides recently to persuade iron ore to rebound,” a Shanghai-based market analyst commented.

Demand for imported iron ore among Chinese steelmakers has been sorely depressed recently, due both to the production curbs on some steel mills in North China’s Hebei province, and to the fact that some steelmakers are controlling their steel output lest the softening of domestic steel prices punishes their profits even more brutally, as Mysteel Global reported.

Just two days ago, Wu’an city, a major production base of wire rod and medium plate in North China’s Hebei province, opted to intensify restrictions on local steel mills’ production for the rest of August, with at least four mills ordered to totally suspend all sintering operations and to bank all but just one blast furnace each for 8-10 days over August 22-31. This alone will slash the mills’ total pig iron output by nearly 180,00 tonnes during the period, Mysteel calculated.

“The recent sharp fluctuation in iron ore prices is also prompting most steel mills to keep an even tighter clamp on their iron ore stocks, with the result that their buying interest these days has all but evaporated,” the analyst added.

Sentiment among iron ore traders were even more fragile, with many of them – even some large-sized trading houses – willing to sacrifice their offering prices little by little over the past few days, trying to secure as many additional sales as possible, a Shandong-based iron ore trader told Mysteel Global.

“Many traders expect iron ore demand in September to continue to be weak as the environmental controls might be stricter in North China ahead of the special celebrations planned for October 1,” the trader explained. During the first week of October, China will mark the 70th anniversary of the founding of the People’s Republic with special events planned nationwide, Mysteel notes.

As if there weren’t already enough reasons for the market to be dismal, other voices are contributing to the bleak sentiment.

For example, Fortescue Metals Group has just increased the size of the discount it offers long-term contract buyers of its lower-grade iron ore products for September supplies. “To some degree, this will lower the price bottom of prevailing iron ore prices,” a Shanghai-based iron ore analyst remarked.

For September, FMG’s discount for its 56.7% Fe Super Special Fines will increase to 11% from August’s 6%, and that for 58.3% Fe FMG Blend Fines will be lifted to 6% from last month’s 4%, as Mysteel Global reported.

On Tuesday, Melbourne-based BHP said it expected average benchmark prices of steelmaking raw materials to be lower in financial year 2020 than 2019, though it also anticipated that prices are likely to remain above long-run marginal cost, according to the company’s latest economic and commodity outlook released on its official website.

And in its latest financial year report released on August 20, BHP said it also expected iron ore supply conditions – disrupted earlier this year by Vale’s tailing dam tragedy – to return to a more normal path on a one- to three-year timeframe, and that prices are likely to be volatile as that adjustment plays out.

Written by Victoria Zou, zyongjia@mysteel.com
Edited by Russ McCulloch, russ.mcculloch@mysteel.com