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Vale Takes the Lead to Lower Q4 Iron Ore Price
Oct 18,2011 16:37CST
smm insight
Source:SMM
Vale agrees to adjust Q4 iron ore prices and planned to cut iron ore price from previous USD 175/mt to USD 160/mt based on current iron ore futures index.

SHANGHAI, Oct. 18 (SMM) -- According the a large steel mill in north China, the steel mill is negotiating with Vale, one of the global top three iron ore giants. Vale agrees to adjust Q4 iron ore prices and planned to cut iron ore price from previous USD 175/mt to USD 160/mt based on current iron ore futures index. Chinese steel mills are expecting deeper iron ore price cut, given that current iron ore prices are still significantly higher than prices in the same time of last year.

The initial iron ore price cut by global iron ore giants is a little bit surprising, but is reasonable given current dim market. Data suggested that, long-term contract iron ore price for Indian fines (Fe 63.5%) fell from USD 190/mt to current USD 166/mt, down 12.4%. In domestic steel market, the onset of traditional high-demand period did not witness robust demand, but saw steel price slump instead. Prices for spot rebar fell from RMB 5,028/mt in early August to current RMB 4,525/mt, down around 10%. As market was sluggish, many large steel mills gradually lowered offers of steel for delivery in November.

 China’s monetary continued to be tight, and most steel mills experienced liquidity crunch. As condition in downstream real estate and automobile sectors was sluggish, prices of steel were almost near cost line. Under this circumstance, some steel mills began to conduct unit maintenance. It is expected that more and more steel mills will halt production and conduct unit maintenance in the future, which will further reduce demand for imported iron ore. In addition, according to statistics at iron ore ports, iron ore inventories were 98.8 million mt, a historical high. Most trades at ports believed that possibility for iron ore prices to fall further was high. 
 
With investment and development of new iron ore mines by overseas large mining companies and emerging mine operators, supply of iron ore is increasing and supply of global iron ore will also grow. The iron ore price cut by Vale may be only a prelude, and it is expected other overseas mining companies will also follow suit.


 

Vale; iron ore price; Q4 iron ore price cut;

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