Iron Ore Prices Likely to Remain Volatile in the Short Term

SHANGHAI, Feb 15 (SMM) - Iron ore

Iron ore futures prices rose yesterday, with the most-traded 2301 iron ore contract closing down 0.41% at 856.5 yuan/mt. Traders were active in delivery while steel mills mainly purchased as needed, hence the market trading atmosphere was fair. The transaction prices of PB fines in Shandong were mainly 860-869 yuan/mt, which was 4-14 yuan/mt higher than in the previous day, while the PB fines in Tangshan were sold at 880 yuan/mt, up 5-17 yuan/mt.

In light of favourable policies for real estate infrastructure, the market was still optimistic about the demand for iron ore. However, the downstream demand recovered relatively slow and the increase in pig iron output was limited. The rising port inventory curbed the increase of iron ore prices. The market sentiment will still change in the short term. Iron ore prices are expected to remain volatile.

Coal and Coking coal

On February 13, the transaction prices of first-grade metallurgical CQD in Luliang, Shanxi were 2,890 yuan/mt (ex-factory), flat from the previous day.

The bad weather condition have affected the shipments in Shanxi. At the same time, traders and downstream enterprises were generally not enthusiastic in purchasing. As such, inventory of some coal mines accumulated, but the prices were stable amid the relatively low inventory.

On the supply side, coke enterprises produced stably, but the pace of shipments slowed down, with accumulating coke stocks across some enterprises.
On the demand side, the coke inventory of steel mills gradually increased to a reasonable level, hence some steel mills controlled the arrivals of coke. Coupled with the weak sales of steel products, steel mills mainly purchased coke on demand.

Steel scrap

The prices of steel scrap weakened yesterday. The prices in east China fell 30-50 yuan/mt, and those in the south-west dipped about 30 yuan/mt.

On the demand side, the steel scrap stored by steel mills before the CNY holiday was lower than in the same period in previous years, which boosted the restocking demand from steel mills post CNY. On the supply side, the production of steel scrap recycling and processing enterprises has not yet fully recovered, and these companies were less willing to ship, which forced the steel mills to raise their purchase prices.

Rebar

Rebar futures dropped slightly yesterday.

On the supply side, the output of rebar is picking up periodically. According to SMM survey, the profits of most EAF and BF mills are hovering around the break-even point. The growth rate of rebar supply is limited by the mills’ profit margins.  On the demand side, construction sites have resumed work one after another, and demand has gradually picked up. The futures prices rose slightly yesterday afternoon, stimulating some low-priced transactions. And the overall demand increased significantly compared with the previous trading day.

HRC

HRC futures prices fluctuated within a wide range yesterday and gained 0.34%. Spot transactions in Shanghai and Lecong markets were acceptable. In the afternoon, as the futures prices rose, the spot transactions improved.

HRC supply rose slightly, and the demand is recovering steadily. In the short term, the better fundamentals of HRC are expected to drive HRC prices further upward amid favourable macro policies and relatively stable costs.