Iron ore prices fell on Wednesday July 21 due to steel production cuts in some Chinese provinces for the second half of 2021, sources said.
Fastmarkets iron ore indices
۶۲% Fe fines, cfr Qingdao: $214.79 per tonne, down $6.25 per tonne
۶۲% Fe low-alumina fines, cfr Qingdao: $216.17 per tonne, down $6.85 per tonne
۵۸% Fe fines high-grade premium, cfr Qingdao: $176.44 per tonne, down $5.83 per tonne
۶۵% Fe Brazil-origin fines, cfr Qingdao: $249.10 per tonne, down $6.80 per tonne
۶۲% Fe fines, fot Qingdao: 1,452 yuan ($223.88) per wet metric tonne (implied ۶۲% Fe China Port Price: $209.96 per dry tonne), down by 32 yuan per wmt
The most-traded September iron ore futures contract on the Dalian Commodity Exchange (DCE) decreased sharply after opening and ended down by 4.8% from Tuesday’s close of 1,233 yuan per tonne.
The most-traded August iron ore forward-month swap contract on the Singapore Exchange (SGX) also fell. By 6:11pm Singapore time, it had registered a decrease of $7.79 per tonne compared with Tuesday’s settlement price of $212.79 per tonne.
Implementation of crude steel production limits was heard in some provinces in China, sources told Fastmarkets.
A trading source in Shanghai said that the Fujian and Jiangsu provinces were both required to control the total crude steel production of 2021 to no more than the total of 2020.
There was market chatter that Shandong province would release guidance on its crude steel production cut by the end of July, so some steel mills in the province had started to prepare a production plan, a trading source in Singapore said.
To limit steel production to 2020’s level most provinces have to cut production for the rest of 2021 due to high production levels in the first half of the year. Demand expectation in iron ore was largely depressed and prices decreased after the news was heard, a second trading source in Shanghai told Fastmarkets.
Since crude steel production will be limited, the demand in different iron ore products may differ. Steel mills could switch the blend ratio to more usage of low-grade fines, because steel mills have sufficient sintering capacity to support limited steel production and they do not need the high-grade fines which are typically in demand for steel production increases, the source added.
Sentiment in the iron ore market was further weakened on July 21 by the news of extreme flooding in the Henan province, and the National Development and Reform Commission of China again stressed to avoid price speculation and to maintain discipline in futures trading, a trading source in Hong Kong said.
Quote of the day
“Some steel mills in China have been selling their long-term contracts or inventory under the expected steel production cut, but the prices at ports have not decreased heavily until today, when futures took a nose dive. Pilbara Blend fines and Super Special fines at ports in Shandong were traded lower and lower through the day with panic,” a trading source in northern China said.
Pilbara Blend fines were traded at 1,440-1,475 yuan per wmt in Shandong province on Wednesday, compared with 1,470-1,485 yuan per wmt on Monday.
The latest range is equivalent to $208-213 per tonne in the seaborne market.
Dalian Commodity Exchange
The most-traded September iron ore futures contract closed at 1,174 yuan ($181) per tonne on Wednesday, down by 59 yuan per tonne from Tuesday’s close.
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