Seaborne iron ore prices slumped by over $20/t dry metric tonne (dmt) or 13pc today, the largest drop on record, as market participants scrambled to sell because of weak demand and anticipation of further price declines.
The Argus ICX 62pc index plunged by $20.65/dmt to $131.80/dmt cfr Qingdao. The index dropped by 13.54pc from a day earlier, the largest single-day decline according to Argus' records. The 65pc index fell by $24.05/dmt or 13.8pc to $150.55/dmt.
September iron ore swaps on Singapore Exchange (SGX) had fallen below $130/dmt by 17:15 Singapore time — "the lowest level since mid-March and down by 12.85pc in a single day," a Tangshan mill manager said.
Seaborne trade was frozen on expectations of a further drop in prices. A cargo of Iron Ore Carajas (IOCJ) fines with a 17 August bill of lading date traded at a $3.20/dmt premium to an October 65pc index. "The gap between 65 and 62pc grades may continue to narrow as mills switch to lower grades," a Beijing mill manager said. The spread between the Argus 65pc and 62pc indexes stood at $18.75/dmt today, down from $22.15/dmt a day earlier and the narrowest since January.
A cargo of PBF with early September laycan was offered at $131.65/dmt on a 61pc Fe basis on Corex, with no bid by the publication time.
"The $6/t drop in September iron ore swaps on SGX after Dalian Commodity Exchange closed was unexpected. The PBF offer on Corex dropped to around $131/dmt and is likely to fall below $130/dmt soon," a Hebei mill manager said.
Mills focused on cost control and favoured discounted iron ore fines. "If steel prices continue to fall, non-mainstream low-grade iron ore demand will improve," a north China mill buyer said.
China's steel output is expected to decrease at a faster pace in the remaining months to achieve production cut targets for the second half of the year. China will need to cut steel output by 61.6mn t, or 11pc, from the first half to 501.7mn t to avoid exceeding the 1.065bn t of crude steel produced last year, after first-half output increased by 11.8pc.
A cargo of Newman High Grade Fines (NHGF) with early September laycan was heard traded at a $1.20/dmt discount to a September 62pc index yesterday, while a cargo of PBF with September laycan was heard sold at a $2.50/dmt premium to an October 62pc index yesterday.
The Argus PCX 62pc portside fines index fell sharply by 64 yuan/wet metric tonne (wmt) to Yn1,031/wmt free-on-truck Qingdao, taking its seaborne equivalent down by $9.35/dmt to $148.45/dmt cfr Qingdao.
Traders were desperately cutting prices to promote sales, anticipating further declines tomorrow. "PBF was offered at Yn1,055/wmt in the morning at Tangshan port, while the offer dropped to Yn1,030/wmt at noon, and Yn1,020/wmt in the afternoon," a north China steel mill manager said. "Buyers refrained from buying in the afternoon, waiting for a lower price tomorrow," he added. "PBF cargoes that will arrive at the port at the end of August were also actively offered at Yn1,020/wmt in the morning while the offer came down to Yn1,000/wmt and later to Yn995/wmt in the afternoon," a Shanghai trader said. "There is no support for near-term demand and any support may come only around mid-September for restocking ahead of the National Day holiday during 1-7 October," he added.
"A seller offering 10,000t Super Special Fines (SSF) at Shandong port today only managed to sell 6,000t at Yn715/wmt, as buyers are also trying to limit volumes," an east China trader said.
PBF traded at Yn1,020/wmt at Shandong port and Yn1,020-1,040/wmt at Tangshan port.
ICX rationale
There were no ICX-eligible deals today.
There were 22 indicative prices, bilateral bids and offers with a pre-exclusion normalised average of $131.65/dmt with each given a 5pc volume weighting. Normalised prices above $132.55/dmt and below $130.75/dmt were statistically excluded.
65pc fines rationale
Bilateral bids, offers and indicative prices had a post-exclusion normalised average of $150.57/dmt and made up 100pc of the index.
Lump premium rationale
Bilateral bids, offers and indicative prices had a post-exclusion normalised average of 20.18¢/dmt unit and made up 100pc of the index.
