Iron ore producers have experienced nothing short of a miracle in 2016. Despite the majority of market participants believing the contrary, iron ore prices have rallied by about 36% YTD in 2016. The price for benchmark 62% fines rose by 0.29% to USD 59.31 a tonne as activity increased on Tuesday after data showed higher steel production in China in mid-August as steel mills tried to take advantage of higher steel prices keeping iron ore close to USD 60 mark defying bearish outlook from most analysts and surge in inventories at Chinese ports
With more than 50% share in global production & consumption, the health of Chinese steel sector, saddeled with about 400 million tonne excees capacity & shrinking domestic demand, plays a vital role in other parts of the world. Steel prices in Chinese steel market have improved in last one month as investors are back to gamble on futures amid expectations that the Chinese government will make greater efforts to cut steel making capacity giving more pricing power to the steel mills. Recent logistic bottlenecks due to flooding in North China have further boosted investor confidence that steel shortage will propel up the steel prices. Domestic steel prices in China have gained almost USD 20-60 for different items during August resulting in MoM hike in export levels also by about USD 40. Prices are expected to keep their upward momentum, unless the post-summer demand doesn't grow as expected. Then the gains in prices might not be sustainable and the first signs have started to appear this week as domestic prices of some of the items have started correcting at few locations on Monday & Tuesday. Market experts feel that it will be difficult for Chinese steel mills to maintain these price levels as the production is at full throttle and domestic demand is unlikely to support such volumes and correction in both domestic and export levels is likely
Coking coal prices surge by 10% on Monday & Tuesday
Its getting unreal for steel mills buying coking coal on quarterly pricing as spot prices for prime hard coking coal prices have further exploded (10%) in the first two days of Week 35 to surge to USD 138 FOB Australia, taking the QoQ gains, since June beginning, to more than 70% as Chinese infused rally has led buyers in other regions to scramble for spot cargoes thus lighting the fuse and increasing cost of steel by more than USD 30 per tonne. Chinese steel mills (Due to a supply shortage in China on logistical bottlenecks & mine closures) as well as Indian buyers (Low on cargoes) are scrambling for spot cargoes, which are not available in plenty, giving sellers space to ask for any price. Unavailability of spot cargoes from US miners as well as issues at some of the Australian mines are also supporting this surge. It would be interesting to watch further trends to see the high point before prices stabilize or retract
Indian secondary steel market catches fire on month end
Prices of sponge iron, plate cutting, ingot and rebar in secondary sector led Indian steel market surged further on Tuesday, for the second consecutive day, to take the total gains in benchmark pencil ingot to about INR 500-800 at most locations. Similar traction was seen in plate cuttings at Alang, which are used by small mills in West to directly roll rebar. While the month end surge will encourage integrated mills to take a firmer view on September pricing, sustenance remains a key issue and would depend on post rainy season demand revival
info from
Steelguruprices.com
Market intelligence services PS14
ESI Price at posting:
1.4¢ Sentiment: Buy Disclosure: Held
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