WEEKLY: China's iron ore prices fall on listless CNY restocking

Mysteel SEADEX 62% Australian Fines fell to $130.75/dmt CFR Qingdao on January 12, down by $9.35/dmt on week, while Mysteel PORTDEX 62% Australian Fines in Qingdao reached Yuan 1,023/wmt ($142.7/wmt) FOT and including the 13% VAT on the same day, after losing Yuan 36/wmt on week.

From the start of this month, prices of imported iron ore in China had gained upward momentum from market expectations regarding mills' pre-holiday buying of the raw material to tide them through the holiday period when suppliers and freight companies will be off, as reported.

Nevertheless, steelmakers' restocking activities of ore recently have been pedestrian at best, mainly because at prevailing prices, the ore is considered too expensive for most mills when many are still suffering losses when selling their finished steel, a market watcher in Shanghai observed.

For example, only around 27% of the 247 Chinese steelmakers Mysteel regularly checks managed to earn any margin from their steel businesses on January 11, with the proportion being 8.7 percentage points lower than a month earlier, the latest survey showed.

Moreover, for the time being, there may not be any large improvement in the mills' buying to build up their internal stocks, the Shanghai source added.

"Although some mills last week started bringing their blast furnaces back online after stoppages for annual maintenance, the overall rise in mills' hot metal output will be limited in the coming weeks given their thin margins," a ferrous futures analyst in Shanghai predicted.

As for imported iron ore prices, they still face the risk of falling further from the softened market sentiment, the second source pointed out. Market players have begun worrying that any further accumulation in steel stocks that may drag the prices of steel and iron ore down even further, he said.

Written by Lea Li, liye@mysteel.com

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