Iron Ore Futures Rallied after A Brief Drop on the Rumour of Production Cuts

SHANGHAI, Jun 9 (SMM) – Iron ore futures experienced a choppy day yesterday. The contract once gained 1% at 942.5 yuan/mt in morning trade, but lost nearly 2% on the rumour of production cuts in east China. The contract rebounded later in the day with support from the fundamentals. The decline narrowed to 0.48% closing the day, and stood at 926.5 yuan/mt.

In the spot, traders were active in shipping, while steel mills were mainly wait-and-see. The transaction prices of PB fines in Shandong were mostly 985-1,000 yuan/mt, flat from a day ago. The super special fines in Shandong were mostly traded at 818-819 yuan/mt. PB fines and SSF in Tangshan were sold at 985-995 yuan/mt and 830 yuan/mt respectively, down 10 yuan/mt and 3 yuan/mt from a day ago.

Recently, there are rumours of production restrictions in Jiangsu Province. According to SMM research, as of June 8, none of the top-tier steel mills in Jiangsu Province has received production restrictions for the time being, and only some second and third-tier mills said they have received production restrictions and are considering cutting the production. (Note: SMM research result is merely the representation of the expression of relevant contacts, and is for reference only)

At the same time, the Dalian Commodity Exchange held a meeting yesterday with the focus on iron ore delivery, including encouraging the delivery with in-plant stocks, encouraging the delivery of domestic ores, improving the delivery convenience, such as examination exemptions.

To sum up, SMM believes that the transactions of finished products are still restricted by the rumour of production cuts, the approaching of seasonal low, the rainy season in south China as well as the high temperature in north China that suppress downstream operating rates, and some steel mills are considering reducing the production. Nonetheless, iron ore prices are likely to remain stable with some downward potential as the fundamentals have changed little.