Firm iron ore restocking demand, macro factors support China’s portside prices

Despite a large discharge volume, sufficient supply, and ample stocks at Chinese ports, portside prices were supported in the week ended Jan. 26 by firm restocking demand from steel mills, along with macroeconomic factors, ahead of the Lunar New Year holidays, market sources said.

Platts assessed the 62% Fe IOPEX at Yuan 1,043/wmt FOT North China Jan. 26, up Yuan 28/wmt or 2.8% from Jan 17, S&P Global Commodity Insights data showed.

The Chinese iron ore market received a stimulus boost after the People’s Bank of China announced a larger-than-expected cut in banks’ reserve requirement ratio by 50 basis points on Jan. 24, in a bid to support its struggling economy and lift consumer confidence.

Generally, most Chinese steelmakers keep high blast furnace operating rates during the Lunar New Year break, followed by post-holiday maintenance for these blast furnaces, according to an S&P Global market survey of 14 large Chinese steel mills during the week ended Jan. 26.

The iron ore discharge volumes at 34 major ports in China during the week ended Jan. 19 reached 27.35 million mt, up 14% on the week, S&P Global Commodity Insights at Sea data showed. The total discharge volume in the first three weeks of January was 78.72 million mt compared with 65.98 million mt, or up 19.31%, from the same period in December 2023.

The ample Chinese portside stocks may pressure iron ore spot prices should there be no pick up in liquidity and end-user demand.

Steel mills chose to increase the frequency of iron ore restocking but reduced the volume in each round to soften the impact on portside prices, multiple steel mill sources said. It is likely that steel mills will continue restocking activities until the end of January, one week before the Lunar New Year on Feb. 10.

The liquidity of non-mainstream low-grade lumps was heard to be stronger than other mainstream medium-grade lumps such as NBL and PBL. Poor steel mill production margins and less cost-effective lumps have dampened steel mills’ demand.

According to a Tianjin-based iron ore trader, mills preferred purchasing mainly non-mainstream low-grade lumps, mainstream medium-grade fines, and low-grade fines.

Profit margins of mills producing hot-rolled coil and rebar in China were at minus $45.95/mt and minus $60.51/mt, respectively, on Jan. 26, S&P Global data showed.
Source: Platts