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Iron Ore Jumps on Steel Output Recovery

Seaborne iron ore prices rose on Thursday due to Chinese steel mills increasing production in December, leading to increasing bullishness over prices going forward.

The Kallanish KORE 62% Fe index inched $4.38/t higher to $112.21/dry metric tonne cfr Qingdao. The Kallanish KORE 65% Fe index gained $4.45/t to $130.79/dmt cfr, and the KORE 58% Fe index increased $3.18/t to $84.50/dmt cfr.

On the Dalian Commodity Exchange May iron ore settled up CNY 9/t at CNY 664/t ($104.31/t), and on the Singapore Exchange January 62% Fe futures settled up $4.42/t at $116.95/t. The same contract for 65% Fe and 58% Fe futures settled up $4.36/t at $135.44/t, and up $0.62/t at $83.50/t respectively. Two deals of 170,000 tonnes for 62% Fe BRBF fines were booked at $116.9/t and $117.4/t for January shipment.

Scrap and billet prices started to increase after a period of stability. 6mm+ heavy scrap delivered to mills in the Yangtze River Delta increased CNY 34/t to CNY 3,470/t. In Tangshan, billet was up by CNY 30/t at CNY 4,360/t.

China Iron & Steel Association data shows average daily crude steel output at major Chinese steelmakers in the first ten days of December increased by 12.66% period-on-period to 1.93 million tonnes. This however was a 12.18% decline on-year.

By the end of November, steel mills had basically completed production reduction targets set by the government, and so they have been arranging production restart plans for when steel prices recover. The marked increase in steel production also supported iron ore consumption by steel mills, thereby stimulating the increase in iron ore prices.

Kallanish Asia