International Steel Prices

Chinese Update: Iron Ore Bubble & Steel Export Offers

February 25, 2014

Steel Market Update has been in constant contact with one of our Asian trading sources who is a trader of iron ore to Chinese steel mills and exporter of finished steel out of China around the world. We have been discussing the iron ore “bubble” which continues to inflate and our source believes it will be only a matter of time before a correction – similar to 2012 – will occur. Current iron ore spot prices are $119.1 per dry metric ton (dmt) on 62% Fe having broken through the $120/dmt level for the first time since July 2013 according to The Steel Index (CFR Tianjin Port).

On Friday, iron ore stocks were reported to SMU to have been 100.91 million metric tons.

There have been many articles coming out of China recently regarding the Chinese government’s attempt to reduce pollution by forcing the mills to reduce production. However, it appears that many of the offending mills continue to run as they must produce steel in order to pay back their loans.

A number of Chinese steel mills and traders who have lost their ability to receive loans from legitimate banks have turned to other sources and are using iron ore as collateral which has inflated inventories and propped up pricing.

During 2012 iron ore prices dropped to $86.7/dmt for 62% Fe on September 5th. Earlier in the year the commodity had been trading as high as $149.4/dmt in the middle of April.

Steel Offers

We asked our Asian trading contact to provide us with where he was seeing offers for exports out of the Chinese mills. He provided the following information based on current offers and orders they have going to Europe:

“For HRC, we are working on 1.80mm (20% of Order Max.) up to 12.0mm x 1250/1500mm widths in S235JR and S275JR+N and S355JR+N which as previously discussed with you, the “235”, “275” and “355” is the Min. Yield of the HRC. Of course, the “N”, is Normalised and meaning ON LINE ANNEALING. The price we have is USD575/mt CNF FO and the freight is around USD47/mt, so backtrack to FOB ST. LSD level. Note, mills in the past refused such thin gauge HRC of 1.80mm and only gave 2.2mm and up, but now accepting 20% 1.80mm.”

SMU Note: 1.80mm = .071” thickness. Pricing = $479 per net ton FOB Stowed Vessel China.

“For Wire Rods, SAE1006/1008B (Boron Added for Rebate), the price is USD512/mt FOB ST. LSD. We are doing business at this number John and includes 20% 5.5mm.

For Debars [Rebar] in 12mm and up to 38mm in BS4449 Gr. 460B (British Standard) and also CSA (Canadian Standard) sizes 10M and up in 400W, the price are USD520/mt FOB ST. LSD. We are doing business at this level John.”

“For Galvanized, mills are “offering” 0.58mm x 1250/1500mm in DX51D which is similar to ASTM A653 CS Type A and Zinc 140gr/M2 and price is USD740/mt, CNF FO EU ports and deduct the USD47/mt freight to backtrack to FOB ST. LSD levels. This is OFFER price John and not much business be concluded at this level as buyers are seeking about USD10/mt lower than this level as incentive to buy imports on long delivery time and extended tie up of credit as if these cargo are for April shipment, it means March LC, April Shipment, 45-50 days on the water, the buyers can only use the cargo in June!”

SMU Note: 0.58mm = .0228” thickness with widths from 49.213” to 59.055”. Pricing = $628 per net ton, FOB Stowed Vessel China.

“So far, this is all I have in hand as real levels in the market. CRC is a very, very SLOW and inactive product right now.”