Coke futures in China fell in morning trade on Wednesday to their lowest in more than a week, pressured by weak demand as steel mills hit by a slump in profit margins sought to reduce their costs, while iron ore was somewhat flat.
The most-active September coke contract on the Dalian Commodity Exchange dropped as much as 3.1% to 2,068.50 yuan ($300.52) a tonne, the steelmaking input’s lowest since July 1. It ended the morning session 2.3% down at 2,087 yuan.
Coking coal, the raw material to produce coke, slipped 0.8% to 1,374 yuan.
Chinese steel mills have been looking to slash input costs by switching to low-quality iron ore, the prices of which have rallied this year to the highest in more than five years amid tight supply, and to cheaper coke.
“Currently, steel mills are making very slim margins because of very high iron prices, while steel prices are now declining, so they are trying to reduce their costs,” said Richard Lu, senior analyst at metals consultancy CRU Group’s Beijing office.
While steel mills have also turned “very slow” in buying coke from the spot market, he said supply remains abundant as major coke makers continue to operate at “relatively high levels of capacity”.
* The most-traded Dalian iron ore for September delivery ended the morning session down 0.2% at 881.5 yuan a tonne, following two days of gains.
* The most-active October construction steel rebar contract on the Shanghai Futures Exchange edged down 0.4% to 4,030 yuan a tonne. Hot rolled coil, steel used in cars and home appliances, dipped 0.8% to 3,891 yuan.
* Benchmark spot 62% iron ore for delivery to China, SH-CCN-IRNOR62 was steady at $117.50 a tonne on Tuesday, near a more than five-year high of $126.50 hit on July 3, according to data tracked by SteelHome consultancy.
* “Long-term bulls now have quite different views (about iron ore). I think it’s now on the edge of a turning point,” CRU’s Lu said, adding that prices are “too high and corrections are needed”.
* Iron ore shipments from Brazil and Australia are likely to improve in the second half of the year, easing the supply tightness gradually in ports across China, he said.
* Jefferies has revised its iron ore price forecasts higher, after S&P raised its price assumptions for this year and the next two for the steelmaking raw material, as it expects a prolonged hit to supply amid mine shutdowns in Brazil.
* Jefferies sees iron ore prices at $98 a tonne in 2020, up from a previous forecast of $85; and $85 a tonne in 2021, from $75 previously.
* A Brazilian state judge on Tuesday convicted top iron ore miner Vale SA for damages caused by the deadly rupture of a tailings dam in January that killed at least 240 people.
* The Baltic Exchange’s main sea freight index rose to its highest in 11 months on Tuesday, driven by higher rates for larger capesize vessels on strong demand for shipping iron ore.