IRON ORE PRICE REBOUNDS as China steel output hits all-time high BIG for FEL

More upside for the ore price and for FEL

Iron ore price rebounds as China steel output hits all-time high

Iron ore prices climbed back on Monday as China’s steel output hit a record high despite the government’s pledge to curb annual production to reduce pollution and increase costs from raw materials.

Crude steel output in April rose to 97.9 million tonnes to hit monthly and daily run-rate records.

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The robust pace of production also lifted the year-to-date tally to 375 million tonnes, a 16% jump compared to same period last year. This comes as iron ore stockpiles at Chinese ports declined for the third week, indicating strength in demand.

Benchmark 62% Fe fines imported into Northern China (CFR Qingdao) were changing hands for $217.77 a tonne on Monday, up 4.3%, according to Fastmarkets MB.

Fastmarkets’ 62% Fe iron ore fines index experienced its most volatile week on record last week. After a new high-water mark of $237.57 per tonne on Wednesday, the index plummeted on Friday with a record daily loss of -$28.78.

“We don’t believe runaway iron ore prices are down to a macro reinflation trade on futures markets. While iron ore’s highly liquid paper contracts can certainly impact sentiment, the hallmarks of genuine physical tightness are evident in the details,” said Peter Hannah, Index Manager at the commodity price reporting agency.

“Firstly, expanded quality differentials signal consumers’ willingness to pay up to raise productivity. The premium the 65% Fe Fines Index commands over the 62% Fe hit a record level too in recent weeks and is a key bellwether of steel mills’ profit motive.

Higher prices for low-impurity brands bought and sold at Chinese ports compared with their seaborne traded levels (more than $50/t for Vale’s Brazilian Blend) have reflected a strong appetite for immediate consumption of the most desired chemistries, Hannah said.

“You would not expect to see this if speculation were the main driver of the rally,”

“As China’s steel production still continues to expand, its steel margins remain elevated and seaborne iron ore supply remains constrained, we think that the iron ore price can stay around the current level through 2Q, but is likely to remain highly volatile,” analysts at Morgan Stanley wrote in a note.