Steel Products Prices North America

Iron Ore Prices (China) Collapsed on Monday

March 11, 2014

Steel Market Update (SMU) has been writing about the building of the iron ore bubble in China for some time now. Our iron ore trading contact in Asia has been warning us of the massive inventories being built and now the crackdown by the Chinese government and banks on bad loans to both public and privately owned steel mills which is causing the bubble to begin to deflate.

On Friday we received the following information from our Asian iron ore and steel contact, “The Banks announced this afternoon they are going to intervene on Iron Ore at the Ports now. Buyers/Mills are requesting extensions on the payments and since the Buyer’s have to provide 20-30% Deposit when Opening the LC and against Negotiation of the Documents, the Banks are now advising they will confiscate the 20-30% and auction the Iron Ore at the ports to recover the 70-80% as they are refusing any extensions….”

On Monday iron ore transactions dropped to $103.50 per dry metric ton CNF FO on 62% Fe as a cargo of Australian fines for the end of March/early April shipment was booked at that level. The Steel Index pegged their 62% Fe fines index at $104.7/dmt that same day and then on Tuesday increased the number slightly to $104.9/dmt (prices are CFR Tianjin Port in China).

Our Asian iron ore trading contact advised us this morning (Tuesday), “nothing moved today, but some are ‘guessing’ that the market has hit bottom.”

On Friday of this past week TSI had iron ore pegged at $114.2/dmt for 62% Fe.

To put the past few trading days into perspective, on Monday morning The Steel Index released their iron ore spot price index at $104.7/dmt on 62% Fe fines. This represented a one day reduction of 8.3 percent and 58% Fe fines dropped to $95.1/dmt a 9.9 percent one day drop in spot pricing (CFR Tianjin Port, China).

The new price levels are new 52 week lows. The highest price over the past 12 months was $144.1/dmt on 62% Fe fines. There are projections spot iron ore prices may test the lows made in 2012 which were in the mid $80’s/dmt.

What Does This Mean?

Steel Market Update had been promised new steel export numbers out of China on Monday from one of our steel trading sources. However, we are now being told all of the mills are in crisis mode dealing with the sharp decline in the price of iron ore and the financial implications associated with bank loans being called – which affects collateral which may have been used for loans – and now the issue of dropping steel pricing which limits borrowing power on finished inventories.

“…John, let’s say Ore prices make a small rebound and cargos start to be booked, there is VERY little storage areas at the ports now for Ore and costs are on the rise at individual ports for newly arriving cargos. If volumes continue to increase, in 2-3 weeks, there will be no more free space and no one is considering this potential danger right now of vessel arrival and nowhere to discharge the Ore.

Mills are still unable to give prices as no one is available to discuss due to the management of the mills advising them to “hold” until they can decide “how much” to drop steel prices….”

Below is an interactive graph on the last couple of years of spot iron ore prices which can be seen on our website. The graph tells an interesting visual story on its own. If you have not yet logged into the website or are having problems logging in please contact us and we can assist you in the process: info@SteelMarketUpdate.com or 800-432-3475.

{amchart id=”114″ TSI Iron Ore Prices}