Chinese Iron Ore Demand Increases With Steel Prices

The Steel Index (TSI)’s reported that "daily iron ore spot reference price for 62% Fe fines finished the month at US$185.6 per dry metric tonne.

TSI’s January 62% Fe content fines reference prices averaged US$179.63/dmt, up 6.7% from December’s average of $168.31/dmt.

TSI’s daily iron ore reference price for 58% Fe content fines reached an all time high on 21 January, hitting $158.5/dmt and surpassing the previous high of $150.5/dmt seen on 23 April 2010. TSI’s January 58% Fe content fines reference prices averaged US$152.69/dmt, up 9.6% from December’s average of $139.27/dmt..

Chinese demand for iron ore firmed across the month as steel prices rose. Chinese steel prices have risen on a spate of speculative buying, as the market anticipates further increases when demand returns after the Lunar New Year holiday. 'Rising prices have encouraged mills to ramp up output in an attempt to capitalize on the rebound,' says Oscar Tarneberg Deputy Editor at SBBii China and contributor to SBB’s Analytics China (SAC).

SACiii recently surveyed 29 Chinese mills (accounting for 45% of national output) on their outlook for Q1 and 37% of respondents believed crude steel output will increase in Q1 relative to Q4’10. 39% expected rates of output to remain level and only 15% expected output to fall, suggesting a bullish February for the iron ore market.”

Platts reported that "Seaborne iron ore prices inched lower Friday, as trading activity took a back seat with most Chinese participants out of the market. The Platts 62%-Fe fines assessment was down 25 cents at $186.75/dmt CFR North China, and 63.5/63%-Fe was down 25 cents at $191.75/dmt. 'Sentiment is softer following today's announcement by the Chinese government to restrict the buying of 3rd properties,' a trader in Hong Kong said.

Traders said Indian miners were still offering 63.5/63%-Fe cargoes upwards of $195/dmt CFR North China, but a Hong Kong trader said he would sell at $192-193/dmt CFR North China an Indian 63.5/63%-Fe cargo that was loading in the next few weeks. No deals were reported done Friday…

Market participants told Platts that steel mills in China have received rosy orders for steel products in the February to March period but their profits margins will be greatly diminished if the spot price of iron ore soars above $200/dmt after the lunar new year holiday…

A mining source said “Prices should drop to about $185-188/dmt CFR China...[ ] referring to medium-grade ore. A further factor cited was the possible lifting of Karnataka's export ban in February, which would ease physical supply."