- Quarterly system can lower volatility, will likely stay
- Analysts see possible move to monthly system
- Vale sees long-term iron prices in $90 to $100 range
The mismatch between the spot price, which recently fell toward $120, and quarterly contracts, which are close to $140 per tonne, could allow speculators to build up stocks when spot prices are low and then buy on quarterly contracts when prices go back up.
Chinese buyers did this in the wake of the 2008 financial crisis with the benchmark system and the spot market, leaving miners selling cheap ore at benchmark prices to clients that often stockpiled it and resold it with a mark-up on the spot market.
The average Iron ore sale price in the second quarter was $91.93 per tonne, above the $64.76 price for the first quarter but still considerably below the price of around $120 that analysts had expected.
LME has merged its 2 regional Billet contracts to create a global consolidated futures contract called Steel Billet. Trading activities on Mediterranean Contract soared 385% to 57606 lots that equals to 3.74 Million tonnes of Steel.
Source: Money Control
- According to port authorities in China, Iron ore inventories at the country’s main ports have reached about 75 million MT, up approximately 2 million MT week on week.
- Total inventories at all Chinese ports amount to nearly 84 million MT, registering a significant increase compared with the previous week.
China’s Iron ore import market has lately observed a slight increase in price but a slowdown in demand. Despite the continuing slight price increases in quotations of imported Iron ore, the upward trend in the domestic Iron ore market has halted, mainly due to the decline in semi-finished Steel prices in some regions.
Last week, the deal price of Indian Iron ore (63.5 percent Fe) exceeded the price level of $140/MT CFR, up over $10/MT within one week, mainly due to the price increases in China’s domestic Steel market and to the uptrend in the domestic Steel futures market caused by the strong rebound in the global financial markets.
However, it seems difficult for the price increases in Iron ore to be accepted by the steel producers due to the weak demand from downstream industries. Experts are estimating that the price of Iron ore in China will drop down in the second half of 2010.
The South Korean government has asked POSCO to lower its domestic steel price to protect SMEs. Following this news the shares of POSCO have fallen by 3.9%.
A restriction on steel prices is difficult due to
· fair trade law
· substantial international trade in the steel sector
POSCO has confirmed that it would go with the steel price hike implemented in July and would not consider a steel price cut in 4Q if regional sentiment were to improve. However, last Tuesday POSCO said in a statement that it would maintain prices of major stainless steel products for August at July levels to encourage local market demand. But it is said that it could cut the price in 4Q if the regional sentiment were to decline.
- Move aims to discourage domestic price increases
- Steelmakers say lower taxes may lead to oversupply
- Gov’t alleged temporary shortage of some plates
Brazil’s government cut taxes on some imported steel products on Thursday, citing a temporary shortage in supplies that could jeopardize production for capital goods producers and petrochemical companies.
The government slashed the tax on carbon-made and rolled plates to 2 percent from 12 percent previously for the next six months, said the Foreign Trade Council, a chapter of the Trade and Industry Ministry, in a statement.
The council, known as Camex, said that domestic production of both products currently fails to meet basic standards. Demand for the plates, which are a key raw material for some capital goods used by petrochemical companies, has increased in recent months.
The government repeatedly threatened to slash taxes on some imported products this year to keep domestic steel prices from rising. Local steelmakers began to raise prices of flat and long steel this quarter after the cost of Iron ore, the main ingredient for steel, doubled since April. Last year, the government reinstated import taxes in June, bowing to pressure from local steelmakers that had been hurt by the global economic recession of 2008-2009. At that time, Camex withdrew long steel, plates, hot- and cold-rolled steel as well as rods from the list of exempted products.
Russia’s steel sector is joining the global race for key raw materials as prices rise, developing assets in remote locations at home while bidding for mines abroad, where competition from global rivals is intense.
Severstal, Russia’s largest steel producer, has made several moves in Africa this year. It has raised its stakes in two gold miners active on the continent and in May it said it would buy 16.5 percent of Core Mining, which holds the rights to Iron ore mines in Gabon and the Republic of Congo.
“Certainly, our priority is raw materials”, Chief Executive Alexei Mordashov said last month. “At this time I am not prepared to say how much we plan to invest as it all depends on the quality of the projects. We want to start with raw materials, mainly iron ore and possibly coal, and we are already involved in Gold production.” Though the trend towards internationalisation is likely to continue, there are disadvantages for Steel companies in moving beyond the borders of resource-rich Russia. Bidding against Chinese and other global rivals for licences pushes up prices, while investing heavily in Africa exposes companies to risks from dealing with unstable governments.
It’s not so much a Russian strategy as part of the global strategy of some of the major Russian steel companies, as they have operations in North America and Europe. In terms of the logistics, this will give them assets that will provide better logistical access to their fabricating facilities located in end markets.
Eight out of 10 mines of Tata Steel in Orissa have raised Iron ore, Chromite and Manganese beyond the IBM (Indian Bureau of Mines) approved mining plan during the last ten years.
These errant mines are:
- Joda East Iron Ore Mines
- Manmora Manganese Mines
- Katamati Iron Ore Mines
- Guruda Tiringpahad Manganese Mines
- Bamebari Manganese Mines
- Joda West Manganese Mines
- Sukinda Chromite Mines
- Malda Manganese Mines.
Nine out of 10 mines of Tata Steel were carrying out operations under deemed extension which meant these were operating beyond the term of their lease period.
Only two of the Tatas’ mines, Khandabandh Iron Ore Mines and Gomardihi Dolomite Iron Ore Mines, operated within the limit of the IBM approved plan during 2000-01 to 2009-10 as informed by the State Steel and Mines Minister, Raghunath Mohanty.
Source: Business Standard, July 29, 2010
Iron ore exporters are increasingly looking at the domestic market, as demand for the ore witnessed decline on the back of sluggish weak demand from China, one of the major buyer of Indian ore said.
The recent controversy over illegal mining in some of the major States of the country and lack of clarity over export tax on the commodity added to this trend. The miners however played safe by entering into supply contracts with domestic manufacturers than relying only on exports.
“Many miners are setting up Pellet plants or Sponge Iron units in the eastern part of the country, prompting miners to divert the commodity to these units.” said R L Mohanty, Secretary of Orissa Miners’ Association. He also said that though new units would absorb some quantity of Iron ore fines, it would be difficult for miners to completely rely on domestic market.
Source: Business Standard, July 29, 2010
In the last one week, Iron ore fines prices have witnessed a sharp upside.
The CNF prices for the grade of Fe 63 have moved from $124/MT to $140/MT in two weeks time which is an increase of over 12 per cent but the volumes continue to fall after Chinese steel prices corrected downwards earlier this week.
One of the reasons behind this price surge can be the tight supplies of the ingredient because of the monsoon season. The monsoon brings heavy rains that halt exports of the powdery iron ore fines which tend to absorb moisture and disrupt the transport of iron ore.
Besides this, the recent news about the ban of Iron ore exports from 10 ports of Karnataka as well as the on going talk regarding the ban on Iron ore transport permits can boost the prices further.. We feel the ban on transport permits will also have an effect on the fines supplies and as a result its prices. .
Commenting on such a move by the Karnataka Government Mr Sajjan Jindal, Vice-Chairman and Managing Director, JSW Steel said “The unexpected ban of Iron ore exports from Karnataka may tarnish India’s image overseas.”
Karnataka may ban transport permits to prevent Iron ore exporters from using other ports, a day after banning such exports from 10 ports. An order banning issue of permits to transport Iron ore for exports will be issued today.However, firms engaged in mining are allowed to supply the material to Steel plants in the State for value addition.
Any setback on ore exports by India will be a cause of concern because it would not only threaten the Iron ore supply in the international market but also prompt China, one of the key importers to turn towards the top producers- Australia and Brazil.
The move, designed to stamp out illegal mining and tax evasion, will hit supplies from Karnataka, which mined nearly 46 million tonnes of iron ore, or a fifth of total Indian production.