[miningmx.com] — IRON ore prices in China, the world’s biggest market, are headed for a 20% decline this year because of a government-mandated credit crunch as well as uncertainties about steel demand at home and overseas, and
few analysts see them recovering soon.
Rising interest and reserve requirement rates over the year made it difficult for traders and steel mills to find the funds required to make large purchases. The rapid drop in prices over September and October also left many traders facing heavy
losses.
Spot iron ore prices inched up on Friday after a flurry of speculative purchases ahead of the new year. Industry consultancy Umetal said spot offer prices for 61% Pilbara fines gained $1 to $136-139 per tonne, including cost and freight, after staying flat for six consecutive days.
On Thursday, traders in China purchased Pilbara fines at a price of $137.8 per tonne, Malaysian lump at a price of $135 per tonne, 63% Brazilian fines at $155 per tonne and Ukrainian 65% concentrate at $184 per tonne, Umetal said in its “Trading Signals” report on Friday.
Major indexes all made gains on Thursday. Ore with 62% iron content stood at $138.4 a tonne on Thursday, according to The Steel Index, up 1.17% on
the day but down 18.6% compared to Jan. 1.
“There must have been a bit of buying going on before the new year break, and some must be hoping to profit from a jump in prices in the new year,” said a trader based in Shanghai.
“My feeling is that prices are back at their natural level after falling so quickly (in October), so I’m not expecting any major adjustments in the coming few weeks, but there could be a policy announcement to stimulate buying,” he said.
Iron ore prices reached a nadir of around $116 per tonne at the end of October but bounced back as end-users sought to replenish their stockpiles. Mills now have enough to see them through the lunar new year holiday beginning on Jan. 22.
According to a survey by industry consultancy Mysteel, 55 small- and medium-sized steel mills had an average of 39 days of imported iron ore stocks by the end of last week, up from 31 days a month earlier.
Traders are now looking to see what the new year will bring.
While some expect the government to ease the tight credit restrictions imposed in 2011, few envisage a return to the price levels seen earlier this year.
“I’d be very surprised if prices return to $190 – it was clear that those prices were unsustainable,” said the Shanghai trader.
According to a Reuters poll, spot prices of 62 percent iron ore are expected to average $150 per tonne including cost and freight in 2012.
The most traded steel rebar futures contract in Shanghai was largely unchanged on Friday, ending at 4,210 yuan ($670) per tonne, up 9 yuan since the previous close and down 15% from its peak at the beginning of June.
