Spot iron ore steadied, reflecting weak buying interest in the raw material after last quarter's rally as supply rose and Chinese steel prices pulled back from recent highs.
The January-to-March rally that lifted spot iron ore by 24% was largely driven by a pick-up in China's steel market that pushed prices of the commodity as well as raw material like iron ore higher.
But ultimately it's going to be short-lived with the structural overcapacity issue that the market has to deal with, which ultimately will mean less steel production and weaker iron ore demand.
Amid a bleak outlook for iron ore and steel, Australian miner Arrium Ltd was placed in voluntary administration after the collapse of a $927-million recapitalisation plan, putting the jobs of its 7,000 workers at risk.
There was limited trading activity in the physical iron ore market so far this week, traders said, following weeks of buying by both traders and mills that lifted the benchmark spot price to a nearly nine-month high of $63.30 in early March.
Underlining slow demand, stocks of imported iron ore at China's ports reached 97 million tons on April 1.
Iron ore for immediate delivery to China's Tianjin Port fell to $54 a ton.
China's major steel mills have incurred combined losses of 11.4 billion yuan ($1.8 billion) for the first two months of this year as chronic oversupply weighed on the sector.
Fitch Ratings said China's plan to cut steel capacity by up to 150 million tons by 2020 would mean the loss of around 500,000 jobs, and "potentially more in the ancillary industries".
Given the tough challenges, rapid capacity elimination in China may be unlikely, it said.
"This would, in turn, mean prices are likely to remain low, resulting in higher liquidity and default risks for steelmakers, many of which expanded rapidly since 2012, funded by short-term debt," Fitch said.
Following are international spot iron ore prices:
Grade % Fe |
Origin |
Product |
load port |
destination |
Apr 7, 2016: cfr ($/ton) |
Apr 6, 2016: cfr ($/ton) |
Apr 5, 2016: cfr ($/ton) |
Apr 4, 2016: cfr ($/ton) |
63.5/63 |
India |
Fines |
Vizag |
Qingdao |
54 |
54 |
54 |
53 |
62 |
India |
Fines |
FOB Vizag |
|
24 |
24 |
24 |
23 |
62 |
Australia |
PB |
Dampier |
Tianjin |
54 |
54 |
54 |
53 |
63.5 |
Brazil |
Fines |
Brazil |
China |
56 |
56 |
56 |
55 |