WEEKLY: Optimism props up China's iron ore prices

Mysteel SEADEX 62% Australian Fines increased to $136.05/dmt CFR Qingdao on January 26 for an on-week rise of $5.4/dmt, while Mysteel PORTDEX 62% Australian Fines in Qingdao was higher on week by Yuan 18/wmt ($2.5/wmt) at Yuan 1,041/wmt FOT and including the 13% VAT on the same day.

In fact, since the start of this month, Chinese prices of major ferrous commodities including iron ore have been more impacted by forces in the wider economy while the fundamentals of China's iron ore market have remained rather steady and where prices have suffered limited impact.

On January 22, policymakers at a State Council meeting in Beijing clearly signalled that stronger and more effective measures will be unveiled soon to stabilize the market and improve investor confidence, as reported, a promise that quickly brightened the mood in Chinese stock markets and lifted the spot and futures prices of iron ore in turn.

Then, two days later in another measure to perk up the economy, the People's Bank of China announced that it will cut the reserve requirement ratio for all banks by 50 basis points in early February, Mysteel Global noted.

As for the fundamentals of China's iron ore market, demand among steelmakers has weakened gradually as more mills have completed their ore restocking ahead of the Chinese New Year holiday starting late next week.

Although some mills have brought their blast furnaces back online from annual maintenance, their poor returns are still restraining their enthusiasm for production, according to a market watcher in Shanghai.

The source warned that the prices of imported iron ore in China may dip this week if no follow-up news regarding Beijing's economic resuscitation emerges. "In this case, the steelmakers' actual consumption for the raw material will stay relatively low, which would apply downward pressure to the currently high prices of ore," he explained.

Written by Lea Li, liye@mysteel.com

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