Market was Closed During CNY Holiday and Steel Mills Continued to Consume Iron Ore Inventory

SHANGHAI, Jan 28 (SMM) - Before the Chinese New Year, the iron ore futures prices declined slight as the relevant state departments to effectively controlled the futures market. The trading in the spot market was less active as steel mills completed their restocking targets before the Chinese New Year. Therefore, the support for the spot prices weakened, and the spot prices of PB fines at Qingdao port stood at 850-860 yuan/mt before the holiday. However, the Platts Iron Ore Index continued to rise during the CNY holiday and the 62% iron ore index rose to 127.4 as of January 27. The overseas swap prices fluctuated slightly during the period. As of January 27, Singapore swaps of FE 2305 contract closed at 124.95, driving the costs of iron ore to rise $0.5 to $5.

In terms of fundamentals, global iron ore shipments increased slightly before the CNY holiday, the shipments from Australia still increased while that from Brazil were partially affected by the weather. Despite the rainy season in southern hemisphere, as of January 20, according to the shipping data tracked by SMM, the shipments from Australia and Brazil rebounded. Among them, the shipment from Australia stood at 15.98 million mt, up 5% on the week. The shipment from Brazil stood at 1.83 million mt, up 36.6% on the week. However, affected by the shipping schedule, the arrivals at major ports decreased during the CNY holiday.

On the demand side, steel mills maintained normal production and thus the output of pig iron rose steadily. According to SMM survey, the average operating rate at blast furnaces rose 0.15 percentage points from a week earlier to 91.08% before the CNY holiday and capacity utilisation rates at blast furnaces stood at 92.38%, up 0.4 percentage point.  And according to SMM prediction, during the CNY holiday, blast furnaces in central China and southwest China gradually resumed the production, supporting the output of pig iron. Steel mills mainly consumed their inventory during the holiday as they stockpiled previously. However, iron ore traders mainly stopped trading and market transactions were muted.

 On the first day after the holiday, there the spot market may be still cold as traders are less enthusiastic about shipments and steel mills are mainly wait-and-see. The quotations of iron ore in the early trading session were stable and the prices of PB fines at Qingdao ports were 855-865 yuan/mt, and the swap prices fluctuated at a high level. In the follow-up stage, steel mills may have restocking demand after consuming their inventories during the CNY holiday. Iron ore traders may be cautious in the early stage. Amid the release of the stimulus policies, market participants are optimistic about the real estate industry in 2023. However, the iron ore prices may remain volatile next week due to the US Federal Reserve’s interest rate meeting on February 1.