China: Domestic Iron Ore Prices Diverged Last Week, But Are Likely To Fall This Week

Weekly iron ore price review: Hebei: down 10-15 yuan/mt in Tangshan, Qianxi, and Qian’an; western Liaoning: down 10-15 yuan/mt in Chaoyang, Beipiao and Jianping; east China: up 20-30 yuan/mt.

Tangshan: Sharp decline in imported iron ore prices enabled local major steel mills to lower bid prices. Yet, bid prices were cut only slightly due to tight supply. In view of bearish imported ore market, local iron ore prices may inch lower this week.

Western Liaoning: Most mines and dressing plants held back cargoes while taking a wait-and-see approach. The vast majority of pellet plants remained closed due to losses. Major steel mills were reluctant to raise purchase prices as their profit margins were poor. Steel mills in Chifeng, Inner Mongolia, cut purchases from Liaoning due to output cuts. With supply and demand both being weak, local iron ore prices may stabilise or fall slightly this week.

East China: Large mines maintained normal production and were under little inventory pressure. Steel mills’ profits improved after eight rounds of coke price cuts and have no plans to undertake maintenance or cut output in the near future. However, affected by sharply falling imported ore prices last week, local ore prices may go down this week.

Summary: The sharp drop in imported ore prices will prevent domestic ore prices from rising. One the one hand, tight supply will encourage mines to hold offers firm. On the other hand, steel mills will still push for lower ore prices before their profits improve noticeably. SMM expects domestic ore prices to go down this week.
Source: SMM